The economy added a modest 42,000 nonfarm private jobs to payrolls in July on a net basis, according to today’s ADP employment report. The good news is that this is the sixth consecutive monthly gain. The bad news, as the accompanying press release advised, is that those six months of gains “have averaged a modest 37,000, with no evidence of acceleration.” Even an optimist has to concede that the pace so far in job creation has been tepid, at best. Unfortunately, it’s easy to think that more of the same is on tap for the foreseeable future. As such, that raises the possibility that the labor market remains vulnerable to a setback.
“The further improvement does show some underlying momentum in hiring,” Maxwell Clarke, chief U.S. economist at IDEAglobal, told Bloomberg News. Nonetheless, “we’re still on a rocky road,” he added.
Meantime, the consensus forecast for the government’s July jobs report (scheduled for release this Friday) calls for a rise of more than 80,000 private nonfarm payrolls on a net basis, according to Briefing.com. That’s better, but not enough to blow fears of the new normal. Of course, the possibility for a positive surprise of some magnitude keeps the bulls bubbling.
Technically, the labor market is improving. But the margin of safety between growth and contraction is still uncomfortably thin. Maybe Friday’s update will tell us otherwise.