Private payroll growth tops estimates as job market shows signs of tightening

Key Points
  • Private payrolls rose 156,000 in July, better than economist estimates of 150,000.
  • The biggest gains came at larger firms as small business continued to struggle to find workers.
  • The ADP/Moody's Analytics count comes two days ahead of the government's official report expected to show nonfarm payrolls growth of 165,000.
ADP July payrolls rise by 156,000. Here's what that means for the economy

Companies added more jobs than expected in July amid concerns that the U.S. economy was slowing and the labor market was nearing full employment.

Private payrolls increased by 156,000 for the month, according to a report Wednesday from ADP and Moody's Analytics that beat Dow Jones estimates of 150,000. The number was an increase from the 112,000 in June, revised higher from the initially reported 102,000.

While the number showed strength in the overall labor market, recent months have seen a departure from the consistent gains above 200,000 over the past several years, providing more signs that conditions are tightening.

"Job growth is healthy, but steadily slowing," Mark Zandi, chief economist at Moody's Analytics, said in a statement. "Small businesses are suffering the brunt of the slowdown. Hampering job growth are labor shortages, layoffs at bricks-and-mortar retailers, and fallout from weaker global trade."

Indeed, companies with fewer than 50 employees lagged their counterparts, adding just 11,000 positions for the month. By contrast, those with more than 500 workers grew by 78,000, while medium-sized businesses added 67,000.

The services sector accounted for 146,000 of the total while goods producers added 9,000. The numbers don't add up to the final total due to rounding.

By industry, professional and business services grew the most, with 44,000 new jobs. Education and health services were next with 37,000 while trade, transportation and utilities rose 27,000.

On the goods side, construction added 15,000 but natural resources and mining fell by 6,000 and manufacturing contributed just 1,000 to the total.

The ADP/Moody's report is watched as a potential benchmark for the more widely followed nonfarm payrolls report, which the Labor Department will release Friday. The two reports can differ widely, though, as June's government count reflected growth of 224,000 against the much smaller ADP total. Economists surveyed by Dow Jones expect payrolls to be up 165,000 for July

The unemployment rate is expected to edge lower to 3.6%, a 50-year low.