Payrolls processor ADP Employer Services on Wednesday reported that the world's largest economy added 163,000 jobs in July, well ahead of the consensus estimate of 120,000 projected by economists in a recent Bloomberg News survey. With the recovery sputtering, the economy is very much in need of a pickup in hiring, which would likely generate wage gains sufficient to spur consumer spending, a vital part of the American economy. The US Labor Department's official reading on July job growth is expected on Friday, which economists expect to show a gain of 110,000 jobs and a stable unemployment rate at 8.2 percent.
ADP's jobs report sparked early gains on US stock indexes, but the gains were short-lived as investors were disappointed later in the day when the Federal Reserve indicated it was not taking any further stimulus measures at this time. With just a few minutes left in trading on Wednesday, all three indexes were right around the break-even point for the day. Investor sentiment wasn't helped when the Institute for Supply Management reported that factory activity contracted for a second straight month in July.
While not an official reading, ADP's monthly jobs report offers some insight for economists and often prompts many of them to reconsider their estimates for the Labor Dept. report, which typically comes out a few days later. However, ADP's numbers have missed the official reading by an average of 72,000 since April 2010, which has prompted many economists to reconsider revamping estimates based on the report.