According to the ADP/Macroeconomic Advisors National Employment Report released this morning, private sector employment increased by 91,000 jobs in the July-August period. ADP (Automated Data Processing) and Macroeconomic Advisors keep track of private sector, non-farm employment. “This month’s jobs figures show modest job creation,” said Gary C. Butler, Chief Executive Officer of ADP announcing the report.
This is a bit of good news in a sea of bad economic news. It represents the 21st straight month that private sector employment has grown averaging 71,000 jobs per month this year. This conflicts with the rhetoric coming from GOP presidential candidates who bash the President claiming he is destroying jobs.
The Bureau of Labor Statistics will release total employment figures including public sector jobs later. Public sector employment is expected to be down again due to budget cuts at the federal, state, and local levels.
Small Business responsible for most jobs increases
The ADP report indicated that of the 91,000 new jobs created, small businesses (employing 1-49 employees) added 58,000 jobs, medium businesses (50-499 employees) added 30,000 jobs, and large businesses (over 500 employees) added only 3,000 jobs.
Most new jobs were in the service industry which includes everything from fast food, to education, to health care providers. This sector added 80,000 of the 91,000 new jobs. The remaining 11,000, were in businesses engaged in producing goods. The manufacturing sector actually lost 4,000 jobs in August.
Even though the service industry added 80,000 jobs, this is down from the 115,000 in June and July. Employment in the construction industry increased 7,000 jobs. This follows three months of decline.
Employment growth below what is considered stable employment
According to Joel Prakken, Chairman of Macroeconomic Advisers, LLC, co author of the report, “Today’s ADP National Employment Report suggests that the trend in employment moderated somewhat in August at a pace below what would be consistent with a stable unemployment rate.”
Even though the economy is producing jobs, the rate is not keeping up with population growth. It is estimated that the economy needs to add 300,000 jobs a month to bring the unemployment rate down. Depending on how bad the news for public sector employment is, the unemployment rate will likely remain unchanged.
Big business sitting on sidelines
What this report shows is that big business is sitting on the sidelines while small business is growing the economy. Big business has never had as much money in the bank as it does now, but it refuses to invest it in jobs.
The Republican jobs plan proposes a tax break for small business. It appears however, that to grow jobs, lawmakers must look at getting big business to hire. There is speculation that some executives of large companies are content to keep unemployment high in order to get rid of President Obama in next year’s elections. Most believe the reluctance to hire is concern about a lack of consumer demand.
Clearly, the best job creation program is to put more money in the pockets of consumers so they spend more. Consumers buoyed by perceived equity in their homes last decade spent money and that raised the economy. The collapse of the housing market wiped out that wealth and made consumers retract.
Next week, the President will release his jobs plan. Republicans have already hinted what their plan will be. The two are worlds apart. Odds are against Washington doing anything to create jobs at the end of the day. Let’s hope odds makers are wrong.
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