June 30, 2010 / 12:26 PM / 10 years ago

Private sector sees small job gains in June

NEW YORK (Reuters) - U.S. private sector employment rose by a paltry amount in June, underscoring concerns about a weak labor market two days ahead of a closely watched government jobs report.

A sign in the window of a restaurant that is hiring is seen in San Francisco, California June 3, 2010. Private employers added a paltry 13,000 jobs in June, compared to a revised gain of 57,000 in May, a report by a payrolls processor showed on Wednesday. REUTERS/Robert Galbraith

Employment levels are considered key to a revival in consumer spending, which accounts for more than two-thirds of the economy, and for sustaining the overall recovery.

U.S. private employers added only 13,000 jobs in June, a report by payrolls processor ADP Employer Services showed on Wednesday, well below the 60,000 jobs economists had expected in a Reuters survey and below May’s level.

The May figure in the ADP report, jointly developed with Macroeconomic Advisers LLC, was revised upward to a gain of 57,000 jobs.

“The data is quite concerning. If this weaker trend in private sector employment is confirmed on Friday, it would increase the risk of weak growth in the second half of 2010,” said Zach Pandl, economist at Nomura Securities International in New York.

Friday’s U.S. Labor Department jobs report is expected to show a fall in non-farm payrolls of 110,000 in June overall, as temporary workers hired to conduct the U.S. census were laid off, but a gain in private payrolls of 112,000, according to a Reuters poll of analysts.

There were some signs of optimism, however, with a report showing U.S. Midwest business activity grew slightly more than expected in June.

The Institute for Supply Management-Chicago business barometer fell to 59.1 in June from 59.7 in May, and economists had forecast a June reading of 59.0. A reading above 50 indicates expansion in the regional economy.

In a less encouraging sign, applications to buy homes dropped 3.3 percent to hover just above 13-year lows, the Mortgage Bankers Association said, despite low borrowing costs and home prices average about 30 percent less than their peaks four years ago.

U.S. stocks ended down sharply, with the benchmark Standard & Poor’s 500 index falling 1 percent to 1030.71 as the second quarter drew to a close.

The dollar was little changed against the yen after falling earlier on the ADP report, while benchmark U.S. Treasuries prices were up slightly.

In other data Wednesday, business activity in New York City dipped in June from record levels in May, although a gauge of job growth rose.

The Institute for Supply Management-New York’s seasonally adjusted index of current business conditions fell to 69.3 in June from 89.9 in May.

The Mortgage Bankers Association’s report also showed mortgage refinancing requests jumped 12.6 percent in the week ended June 25 to the highest level since May 2009.

The U.S. housing market continued to deflate after a spring sales spree, fueled by federal tax credits which ended April 30.

“We’re not out of the woods yet,” said James Angel, associate finance professor at Georgetown University’s McDonough School of Business in Washington.

Additional reporting by Burton Frierson, Lynn Adler, Emily Flitter and Ann Saphir, Editing by Kenneth Barry

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