ADP Says U.S. Companies Increased Payrolls by 9,000

By Shobhana Chandra

July 30 (Bloomberg) -- Companies in the U.S. unexpectedly added an estimated 9,000 jobs in July, a private report based on payroll data showed today.

The increase followed a revised drop of 77,000 for the prior month that was smaller than previously estimated, ADP Employer Services said.

Over the past six months, payrolls have been negative each month while ADP has only 2 negative readings over the past 7 months.

In the first six months of the year, figures from the Labor Department show private payrolls have been negative each month while ADP has only two negative readings over the past seven months. The extended housing slump, record fuel prices and crisis in credit markets have weakened demand, prompting employers to cut staff.

``The trend is toward lower jobs,'' Roger Kubarych, chief U.S. economist at UniCredit Global Research, said in an interview with Bloomberg Television in New York. ``There is still contraction in construction jobs and manufacturing jobs, offset to a great extent, but not entirely, by the services sector and the government.'' ADP has ``been overestimating'' the government's figures ``for many months now,'' he said.

The ADP report was forecast to show a decline of 60,000 jobs, after a drop of 79,000 previously estimated for June, according to the median projection of 29 economists surveyed by Bloomberg News. Estimates ranged from decreases of 115,000 to 4,000.

Survey Differences

ADP includes only private employment and does not take into account hiring by government agencies. Macroeconomic Advisers LLC in St. Louis produces the report jointly with ADP.

``Employers are being extremely cautious about expanding payrolls,'' Joel Prakken, chairman of Macroeconomic Advisors, said in a telephone interview today. ``In sectors where there were excesses in payrolls, we're still working those off.''

The ADP figures come ahead of the government's Aug. 1 report, which may show total payrolls fell by 75,000 in July, the seventh consecutive months of job losses, according to the median forecast in a Bloomberg survey. The unemployment rate probably increased to 5.6 percent.

Payrolls dropped by an average 94,000 a month from January through June, according to the Labor Department. The ADP estimate shows gains of almost 11,000 on average.

Goods, Services

Today's ADP report showed a decrease of 65,000 jobs in goods-producing industries including manufacturers and construction companies. Service providers added 74,000 workers. Employment in construction fell by 16,000 and financial firms increased jobs by 4,000.

Companies employing more than 499 workers shrank their workforce by 32,000 jobs. Medium-sized businesses, with 50 to 499 employees, cut 9,000 jobs and small companies increased payrolls by 50,000.

The ADP report is based on data from 399,000 businesses with about 24 million workers on payrolls.

Further softening in the job market adds to concern that consumer spending, which accounts for more than two-thirds of the economy, will retrench. Recent reports indicate the boost from the government's tax rebates may be starting to fade.

Concerns about the credit crunch have roiled U.S. households, outweighing worries about surging consumer prices, said Larry Kantor, head of research at Barclays Capital Inc. in New York.

``When people are focused on the financial distress, these worries about inflation go to the sidelines,'' Kantor said yesterday in an interview with Bloomberg Radio. Over the next three to six months, `that's going to be the main issue.''

Coca-Cola Bottling Co. Consolidated, the second-biggest U.S. Coke bottler, is among companies cutting staff to offset a surge in the cost of energy and raw materials. The Charlotte, North Carolina-based company said on July 18 it will eliminate 350 positions, about 5 percent of its workforce.

ADP began keeping records in January 2001 and started publishing its numbers in 2006.

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net