ADP Says U.S. Companies Added 114,000 Jobs

Companies in the U.S. added 114,000 workers to payrolls in July, according to a private survey.

The increase followed a revised 145,000 gain the prior month, according to data from ADP Employer Services. The median forecast of economists surveyed by Bloomberg News called for an advance of 100,000.

A slowdown in hiring means consumers are unlikely to boost the spending that fuels 70 percent of the economy, raising the risk the recovery may stumble. A Labor Department report in two days is projected to show businesses added 115,000 jobs in July, according to the median forecast of economists surveyed by Bloomberg.

“Payrolls hit a soft patch in the second quarter and incoming evidence in July suggest payroll growth remains subdued,” said John Herrmann, senior-fixed income strategist at State Street Global Markets in Boston. “In the current quarter, there has been no letup to risk” for the economy.

The median forecast was based on a survey of 39 economists. Projections ranged from 20,000 to 150,000.

Stocks were little changed following the longest slump since 2008 for the Standard & Poor’s 500 Index. The S&P 500 fell 0.2 percent to 1,251.5 at 9:46 a.m. in New York. Treasury securities were also little changed.

Over the previous six reports, ADP’s initial figure was closest to the Labor Department’s first estimate of private payrolls in February, when it understated the gain in jobs by 5,000. The estimate was least accurate in January, when it overestimated the increase in employment by 137,000.

June Miss

Last month, ADP’s figures showed a 157,000 gain in company payrolls for June, while the Labor Department’s data showed a 57,000 increase.

Today’s ADP report showed a decrease of 7,000 workers in goods-producing industries last month, which include manufacturers and construction companies. Employment at factories fell by 1,000.

Service providers added 121,000 workers in July, the figures showed.

Companies employing more than 499 workers added 9,000 jobs. Medium-sized businesses, with 50 to 499 employees, added 47,000 and small companies increased payrolls by 58,000, ADP said.

Another report today showed employers in July announced the largest number of job cuts in 16 months. Planned firings climbed 59 percent from July 2010 to 66,414, according to figures released today by Chicago-based Challenger, Gray & Christmas Inc. Job-cut announcements were led by the pharmaceutical industry, which included drugmaker Merck & Co.’s plans to eliminate as many as 13,000 jobs.

Bernanke’s View

In his semi-annual testimony to Congress last month, Federal Reserve Chairman Ben S. Bernanke said the “economy still needs a good deal of support.”

“The most recent data attest to the continuing weakness of the labor market,” Bernanke said July 13. “It’s improving very slowly in terms of jobs regained. Wages are very stagnant and that’s affecting consumer spending and consumer confidence. There is also ongoing uncertainty about the durability of the recovery.”

Job cuts have accelerated as the economy slowed. Cisco Systems Inc. (CSCO), the largest networking-equipment maker, plans to eliminate about 6,500 jobs, or 9 percent of its full-time global workforce, to help trim $1 billion in annual costs and bolster profits.

The job cuts will come from across the company and aren’t concentrated in a single unit, said Karen Tillman, a company spokeswoman, in an interview July 18.

Factory Slowdown

Manufacturing, a stalwart of the expansion, grew last month at the slowest pace in two years, a sign the industry that helped drive the expansion is losing steam, figures from the Institute for Supply Management showed this week. ISM’s employment index posted the biggest decrease since October 2008.

The Labor Department’s report may show overall payrolls rose by 85,000 in July, restrained by cutbacks at state and local governments, the Bloomberg survey showed.

The Labor Department figures will also show the jobless rate held at 9.2 percent last month, according to the Bloomberg survey median.

The ADP report is based on data from about 340,000 companies 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: Bob Willis in Washington at bwillis@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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