Boost in jobs gives hope for US economy

Companies in the US added twice as many workers as forecast in June, indicating an improvement in the labour market that may bolster the economy in the second half of the year.

The 157,000 increase followed a 36,000 gain in May, according to ADP Employer Services. The median forecast in a Bloomberg News survey was for an increase of 70,000.

Other reports yesterday showed a fall in the number of Americans filing jobless claims and a drop in consumer confidence from a 10-week high.

Stocks rose as the payroll additions and recent signs of a boost in manufacturing reinforced the Federal Reserve's view that the slowdown in the first half of the year was temporary.

But although hiring may be picking up, obtaining a sustained drop in the unemployment rate from 9.1 per cent may require bigger job gains.

Payroll increases of around 200,000 a month are needed for a sustained decline in the unemployment rate, says Scott Brown, chief economist at Raymond James and Associates in St Petersburg, Florida.

After the ADP figures, economists at Deutsche Bank Securities were among those raising payroll estimates for today's June employment report from the US Labour Department.

The economy added 105,000 jobs last month, almost double the 54,000 created a month earlier, according to a Bloomberg survey.

Private hiring climbed 125,000 last month, and the jobless rate held at 9.1 per cent, the survey showed.

The Labour Department said that first-time applications for unemployment insurance fell, although they remain at a level that shows the labour market will take time to heal.

Jobless claims dropped by 14,000 to 418,000 in the week to July 2.

The slow decline in the unemployment rate is restraining confidence.

The Bloomberg consumer comfort index fell to minus 45.5 for the week to July 3 from minus 43.9 the week before. The drop was within the survey's 3-point margin of error.

All three components in the Bloomberg survey fell. An index of consumers' views of the economy decreased to minus 80.9, the worst showing since the week ended April 3, from minus 79.2 a week earlier.

The gauge of personal finances declined to minus 8.4, the lowest in four weeks. The buying climate measure was little changed at minus 47.1.

Yesterday's report showed an increase of 27,000 workers in goods-producing industries, including manufacturers and construction companies.

Employment at factories increased by 24,000 jobs, and service providers added 130,000 workers in June. The ADP report is based on data from about 340,000 companies with more than 21 million workers on payrolls.

The ADP figures followed an Institute for Supply Management report last week that showed manufacturing in June unexpectedly accelerated.

- Bloomberg