ADP says companies in U.S. boosted payrolls by 218,000

Companies added 218,000 workers in July, exceeding the average for the year and showing improving demand is bolstering the U.S. job market, a private payrolls report showed today.

The gain this month followed a 281,000 increase in June that was the strongest since November 2012, according to data from the ADP Research Institute in Roseland, New Jersey. The median forecast in a Bloomberg survey of economists called for a 230,000 advance in July.

Businesses are limiting dismissals and taking on more workers, spurring consumer confidence and laying the groundwork for a pickup in household spending that accounts for about 70 percent of the economy. A Labor Department report in two days is projected to show private payrolls climbed by 230,000 workers last month.

“The main concern the last couple of years has been the lackluster pace of new hiring,” Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida, said before the report. “By all accounts, it looks like new hiring has picked up in recent months.”

The recent progress in hiring coincided with a rebound in the economy during the second quarter. Gross domestic product rose at a 4 percent annualized pace from April through June after shrinking a revised 2.1 percent in the previous three months, the Commerce Department said today.

Stock Futures

Stock-index futures extended gains after the GDP data, with the contract on the Standard & Poor’s 500 Index maturing in September climbing 0.5 percent to 1,972.8 at 8:34 a.m. in New York.

Estimates of 45 economists in the Bloomberg survey ranged from gains of 190,000 to 295,000. Private payroll gains have averaged 204,000 this year, according to ADP.

Manufacturers, builders and other goods-producing industries increased headcount by 16,000. Employment in construction rose by 12,000, while factories added 3,000 jobs, today’s report showed.

“The July employment gain was softer than June, but remains consistent with a steadily improving job market,” Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said in a statement. Moody’s produces the figures with ADP. “If current trends continue, the economy will return to full employment by late 2016.”

Payrolls at service providers increased by 202,000.

Small Companies

Companies employing 500 or more workers added 41,000 jobs. Medium-sized businesses, with 50 to 499 employees, took on 92,000 workers and small companies increased payrolls by 84,000.

The Labor Department’s report at the end of the week is forecast to show overall payrolls, which include government agencies, rose by 231,000 workers in July after climbing by 288,000 the prior month, according to the Bloomberg survey. The unemployment rate probably held at 6.1 percent.

Federal Reserve policy makers, who conclude a two-day meeting today, are counting on an improving job market to help spur the economic expansion after a first-quarter setback.

Expectations for sustained growth are allowing companies including GrubHub Inc., which operates an online and mobile platform for restaurant pick-up and delivery orders, to pursue new talent.

“Since technology expertise is notoriously difficult to hire and our long-term growth will ultimately be driven by the quality of our products, we’ve taken this opportunity to accelerate hiring in technology,” Matthew Maloney, chief executive officer, said on a July 24 earnings call. The Chicago- based company made its initial public offering in April.

“In the second quarter alone, we hired over 30 technologists and plan to continue to hire aggressively through the end of the year,” Maloney said.

Consumers Optimistic

Consumers are becoming more optimistic, which could help to boost demand and hasten expansion. Confidence soared in July to the highest level in almost seven years, with the Conference Board’s index rising to 90.9, the highest since October 2007, according to the New York-based private research group.

Automobile sales are another bright spot for spending. Cars and light trucks sold at a 16.9 million pace in June, the strongest since July 2006, based on data from Ward’s Automotive Group.

At the same time, the housing market has slowed. An index of pending home sales declined 1.1 percent in June after rising 6 percent in May, figures from the National Association of Realtors showed this week. Limited availability of credit and sluggish wage growth are making it harder for prospective buyers to take the plunge.

The ADP report is based on data from businesses with almost 24 million workers on their combined payrolls.