Real Estate

ADP predicts strong job growth in July

Will it be enough to influence the Fed's rate decision?

The ADP employment report is out, and it predicts June’s strong job growth will carry over into July.

The report shows an increase in jobs by 179,000. Most of these jobs it predicts will come from the private sector, with an increase of 27,000 in trade, transportation and utilities, 11,000 in financial activities and 59,000 in professional and business.

However, it predicts this will be offset by a decrease of 6,000 in construction.

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(Source: ADP, Moody’s Analytics)

Although data is not yet in for construction in July, privately owned housing starts in June showed an increase from May, but decreased from June 2015, according to the U.S. Department of Housing and Urban Development.

This decrease in construction creates a constricted supply which, combined with low affordability, prevents a larger boost in home sales, even while mortgage rates linger near their all-time lows, according to the Pending Home Sales Index from the National Association of Realtors.

That being said, the strong payroll numbers in July could be just what the Fed needs to raise mortgage rates in September.

In June, Capital Economics claimed that the Fed will raise rates faster than the markets currently expect. In fact, they say that by the end of next year, rates could increase at least 1.75% to 2%.

“The ADP report suggests that private-sector employment increased by a solid 179,000 in July, which is broadly consistent with our estimate that the official non-farm payroll figures will show a 190,000 gain,” Capital Economics Chief Economist Paul Ashworth said.

Overall, predictions show that the jobs report should be a positive sign for July, but of course, ADP has been wrong before.

Last month ADP predicted a jobs increase of 172,000, right before the report came in at 287,000. Before that, ADP predicted an increase of 173,000, and the report came in at a shockingly low 38,000.

Did the company get closer this time? Only time will tell. The jobs report is set to come out on Friday.

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