Up Only 13,000, Private Sector Hiring Was Anemic in June

The economy suffered another setback on the employment front in June, as the private sector added only 13,000 jobs in the month, ADP (ADP) said.

A Bloomberg survey expected private employers to add 113,000 jobs in June. Private employers added a revised 57,000 jobs in May, up from the previously released 55,000, after adding 32,000 jobs in April.

Although June's gain means the private sector has added jobs for five consecutive months, the pace has been modest -- an average monthly increase of just 34,000 jobs, with ADP adding that "private employment may have decelerated heading into summer."

"The slow pace of improvement from February through June is consistent with other publicly available data, including a pause in the decline of initial unemployment claims that occurred during the winter months," ADP said.

Where the Jobs Are -- and Aren't

In June, the job totals by business size (large, medium, small) were gains of 3,000 and 11,000, and a decrease 1,000, respectively.

One qualified bright spot in the June report was the construction sector, which lost "only" 35,000 jobs in June -- the smallest monthly decline since July 2008. Even so, the number of construction jobs lost since the January 2007 peak is now 2.23 million.

The services sector continued to rebound in June, adding 30,000 jobs, and manufacturing increased by 16,000 -- the latter's fifth straight monthly increase. However, goods-producing companies lost 17,000 jobs, and financial services lost 10,000 jobs.

A Pause to Mild Uptrend?

The monthly job reports are key because job creation is positively correlated with corporate revenue and earning gains. And, in general, as corporate earnings go, so goes the U.S. stock market.

June's private employment report was a decided disappointment because it's saying the mild uptrend established in the first half of the year may have paused or ended. However, at this juncture investors shouldn't automatically conclude that the labor market is no longer is in recovery mode, based on June's data alone. Hiring could increase in the months ahead, if commercial conditions warrant it.

One of the ironies of the U.S. economy is that as it becomes more productive per employee, it takes fewer and fewer employees to perform the same tasks. And this has the effect of reducing job gains -- lengthening the recovery time to full employment for the nation. That makes the task of policymakers and executives more difficult.

Even so, they must remain focused on job creation: The U.S. economy needs to create 150,000 to 200,000 jobs every month to both lower unemployment and advance the recovery to a self-sustaining expansion.