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ADP June Private-Sector Hiring +176,000; +108,000 Expected

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07/05/2012 | 02:51pm CET
   By Michael S. Derby 
 

NEW YORK--Private-sector hiring jumped by an unexpectedly strong pace in June, according to a report Thursday.

Firms added 176,000 jobs last month, according to payroll processing giant Automatic Data Processing Inc., in a report compiled with forecasting firm Macroeconomic Advisers LLC. Economists surveyed in advance of the report's release had expected to see it show a 108,000 gain for June.

"The gain in private employment is strong enough to suggest that the national unemployment rate may have declined in June," said Joel Prakken, of Macroeconomic Advisers. "Today's estimate, if reinforced by a comparable reading on employment from the Bureau of Labor Statistics tomorrow, likely will ease concerns that the economy is heading into a downturn," he said.

The ADP hiring report comes on the eve of the closely watched government-produced nonfarm payrolls report. Due Friday, the June release is expected by economists to show a very modest 95,000 gain, versus the 69,000 advance seen in May. Compared to the start of the year, employment data has shown a marked deceleration in recent months, raising considerable worry about the path of the economy. The slowing in hiring has been matched by other worrisome data, raising fears the U.S. may again slip back into recession.

The ADP report is different than the government's release because it counts only private-sector jobs. While closely watched, the ADP report often differs by a notable margin from the government payrolls report, causing some economists to question the report's utility. At the same time, a significant factor in what is currently weighing on the U.S. economy is the government sector, where there has been a steady loss of jobs amid troubled state and local government finances.

ADP is a major payroll processor, saying it handles payments for one in six U.S. workers.

The ADP data's track record led at least some observers to view the June data cautiously. "Given the poor historical performance of this indicator in correctly predicting the performance of the official payrolls report, we see no reason to revise our current forecast for a 100,000 rise in payrolls," said Millan Mulraine of TD Securities.

The ADP report arrives on a day where several of the world's major central banks moved to provide additional stimulus. The European Central Bank cut its key lending rate to a record low amid concerns about economic conditions in that region, while the Bank of England said it again would inject liquidity into its own economy. Meanwhile, the Bank of China also lowered interest rates, again from a concern about the pace of economic activity. Those moves follow the Federal Reserve's recent decision to continue forward with its own program to provide continued support to the U.S.

In another private sector report, TrimTabs Investment Research said its estimate of June hiring stood at 75,000 jobs. That firm's estimates are based on a formula involving daily tax receipts.

Write to Michael S. Derby at michael.derby@dowjones.com

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