Companies in the U.S. added more workers than projected in July, indicating the job market was holding up entering the second half of the year, a private report based on payrolls showed.
The 163,000 increase in employment followed a revised 172,000 gain the prior month, Roseland, New Jersey-based ADP Employer Services said today. The median estimate of 38 economists surveyed by Bloomberg News called for an advance of 120,000.
A pickup in hiring is needed to generate the wage gains that would spur consumer spending, which accounts for about 70 percent of the world’s largest economy. A Labor Department report due in two days may show private payrolls rose by 110,000 in July, and unemployment held at 8.2 percent, according to the median projection in a Bloomberg survey.
“It’s an encouraging sign that suggests there is growth and companies are looking to hire,” said James Knightley, a senior economist at ING Bank NV in London, who had projected a gain of 150,000. “Job growth is still not rapid enough to bring down the unemployment rate significantly.”
Estimates in the Bloomberg survey ranged from 75,000 to 180,000.
Stock-index futures rose as investors awaited the outcome of the Federal Reserve’s meeting for clues on more stimulus measures to support the economy. The contract on the Standard & Poor’s 500 Index expiring in September climbed 0.4 percent to 1,380.5 at 9:10 a.m. in New York.
Another report today showed a measure of U.S. manufacturing decreased in July to 51.4 from 52.5 a month earlier, according to London-based Markit Economics.
Since April 2010, ADP’s initial estimate has either overstated or understated the Labor Department’s initial reading on private payrolls by 72,000 on average. The average miss for the Bloomberg survey’s median forecast of economists was 58,000.
The report “shows OK employment growth, but not fast enough to dig us out of the hole we’re in,” Joel Prakken, chairman of Macroeconomic Advisors LLC which produces the data with ADP, said in an interview on CNBC television. “The labor market is recovering only slowly. The economy is growing lethargically.”
Fed policy makers led by Chairman Ben S. Bernanke will conclude today a two-day meeting to decide whether the economy needs additional stimulus to spur growth that has softened for two consecutive quarters.
Progress in reducing the jobless rate probably will be “frustratingly slow,” Bernanke told lawmakers in testimony in July. He also said the central bank is “prepared to take further action as appropriate to promote a stronger economic recovery.”
Companies paring back staff include Callaway Golf Co. (ELY:US), which in July said it will cut 12 percent of its global workforce across all levels of the organization to reduce costs.
Goods-producing industries, which include manufacturers and construction companies, increased workers by 15,000, today’s figures showed. Employment in construction rose by 5,000, while factories added 6,000 jobs.
Service providers increased payrolls by 148,000 workers.
Companies employing more than 499 workers took on 23,000 jobs. Medium-sized businesses, with 50 to 499 employees, added 67,000 positions and small companies increased payrolls by 73,000, ADP said.
Automakers are among those expanding. Honda Motor Co. (7267), reliant on U.S. vehicle sales for more than half its profit, said it is investing $40 million at its Greensburg, Indiana, plant that produces the Civic compact and will hire 300 workers later this year.
The Labor Department’s report on Aug. 3 may show overall hiring, which includes government jobs, climbed 100,000 in July after rising 80,000 in June, according to the Bloomberg survey median. The jobless rate has held above 8 percent for 41 consecutive months.
The ADP report is based on data from businesses with more than 21 million workers on payrolls. Macroeconomic Advisers LLC in St. Louis produces the data with ADP.
To contact the reporters on this story: Shobhana Chandra in Washington at Schandra1@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at email@example.com