Jobs increase offers positive signals for U.S. economy

7/8/2011

WASHINGTON -- U.S. companies hired four times more workers in June than in May, strengthening views the economy was starting to escape the doldrums of the first half of the year.

A drop in the number of Americans filing applications for unemployment benefits also offered hope for the labor market, although they remain high.

Payrolls processor ADP said Thursday that private sector employment increased 157,000 after a modest 36,000 gain in May, a rise more than double expectations.

With gasoline prices falling, automakers cranking up production, and the decline in house values moderating, the clouds over the U.S. economy are starting to lift.

The jump in private employment was the latest indication the economy was pulling out of its first-half slump, but analysts still see only a modest recovery ahead.

"It adds to the sense of relief that much of the slowdown that the economy endured during the first half of the year was due to temporary factors," said Mark Vitner, an economist at Wells Fargo Securities in Charlotte.

The employment gain, which reflected increases in manufacturing and services jobs, prompted several Wall Street banks to raise their forecasts for the government's closely watched nonfarm payrolls count for June due Friday.

Gains in private hiring last month were largely across the board, although construction and financial services' payrolls shrank. Small businesses accounted for most of the hiring, adding 88,000 jobs. Large companies added only 10,000 workers in June.

"While it is just one month's number, it suggests that maybe what happened was a pause in the economic expansion and as we head into the summer months we're going to pick up some momentum," said Joel Prakken, chairman at Macroeconomic Advisers, which produces the report with ADP.