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Private sector employers added 179,000 jobs in July

Private sector employers added 179,000 jobs in July
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Private sector employers added a healthy 179,000 jobs in July as the labor market maintains solid growth amid a slow economic expansion.

U.S. businesses slightly expanded hiring last month, from 176,000 jobs in June, on the continued strength in professional and business services and in the service sector among retailers, payroll processor ADP reported on Thursday.

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Mark Zandi, chief economist of Moody’s Analytics, said that "job growth remains strong but is moderating as the economy approaches full employment."

"Businesses are having a more difficult time filling open job positions, which are near record highs," Zandi said.  

"The nation’s biggest economic problem will soon be the lack of available workers," he said. 

The service sector, which represents 90 percent of the nation's jobs, added 185,000 positions last month, slower than June's 203,000 pace.

Manufacturing added 4,000 jobs and construction lost 6,000 positions last month.

Zandi expects Friday's government report on jobs to show an addition of 189,000 jobs in July with the unemployment rate holding steady around 4.9 percent.

As the economy approaches full employment, which could be reached by the end of the year, jobs growth is expected to slow while the unemployment rate ticks down.

A dismal government jobs number in May — the economy added only 11,000 jobs — raised concerns that the U.S. economy might be on shaky ground. But June's employment bounced back strong, with private and public sector employers adding 289,000 jobs. 

"I don't think anything in the economy has changed," Zandi said. 

"The job market is fine, the labor market is tightening and there's no reason we should see significant weakness on a sustained basis," he said. 

Businesses continue to hire even though economic growth has slumped this year to around 1 percent.

That hiring is helping the housing market and boosted consumer spending in the April-June quarter.  

Zandi said jobs growth at 180,000 is more than double the 85,000 a month needed to take up the remaining slack in the job market.

The ADP report shows that jobs growth added 179,000 jobs over the past three months, slightly slower than the 200,000 jobs pace.

Professional and business services contributed 59,000 jobs, down from June’s 78,000 but still very strong, Zandi said.

Financial activities added 11,000 jobs, following last month’s gain of 9,000 jobs.

Average monthly job gains fell to about 116,000 in March through May, much slower than the nearly 200,000 pace last year.

Goods-producing employment was down by 6,000 jobs in July, but posted better results than the 28,000 loss in June.

While the overall economy has struggled to gain traction this year, Zandi noted that the negative effects of a reduction in inventories and lack of investment in the energy sector are fading and should bolster growth through the second half of the year.

Medium-sized businesses led the way last month with 68,000 of the jobs, while payrolls for businesses with 49 or fewer employees increased by 61,000 jobs in July, down from 86,000 in June.

“This month’s employment number falls short of the 12-month average primarily because of slowing in small business hiring,” said Ahu Yildirmaz, vice president and head of the ADP Research Institute.

“As the labor market continues to tighten, small businesses may increasingly face challenges when it comes to offering wages that can compete with larger businesses," Yildirmaz said.

Employment at companies with 50-499 employees increased by 68,000 jobs, up from last month’s 56,000.

Large companies — those with 500 or more employees — increased hiring by 50,000, up from June’s 34,000.