Job creation in the private sector tailed off significantly in June in another sign that the economy is getting closer to full employment, according to a report Thursday from ADP and Moody's Analytics.
Companies added 158,000 positions for the month, a number that economists who released the report said was still strong but stood well below the robust 230,000 number the report showed in May. The reading also was considerably below the 185,000 gain that economists surveyed by Reuters expected, and was revised lower from the initial 253,000 count.
"The job market continues to power forward," Moody's Analytics chief economist Mark Zandi said in a statement. "At this pace, which is double the rate of labor force growth, the tight labor market will continue getting tighter."
The ADP/Moody's release comes a day before the government's closely watched monthly nonfarm payrolls count. The market is expecting that report to show a gain of about 180,000 jobs in June. However, the two numbers sometimes don't mesh — in May, the ADP count of 230,000 was well ahead of the 138,000 in the Bureau of Labor Statistics report.
All of the June jobs in the ADP/Moody's count came from services, with professional and business positions showing the biggest gain at 69,000. Administrative and support services contributed 43,000 while the trade, transportation and utilities category grew by 30,000.
On the other side of the ledger, education lost 6,000 jobs, natural resources and mining declined by 4,000 and construction fell by 2,000.
Businesses with 50 to 499 employees led the way with 91,000, while large firms added 50,000. Small business, which has led job creation through much of the recovery, saw growth of just 17,000 for the month.
Federal Reserve policymakers are watching the employment reports closely. Officials at the central bank are curious not only about job creation but also the effect that a tightening labor market is having on wages. Salary growth has remained muted for much of the recovery, and June is expected to show an annualized gain of 2.6 percent.
Minutes released Wednesday from the June meeting of the Federal Open Market Committee indicate that the Fed is likely to raise rates at least once more this year and to begin reducing its $4.5 trillion balance sheet portfolio of bonds, despite the lack of inflation pressures.
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