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By Jason Stipp | 07-07-2011 11:40 AM

Job Growth Getting Back to Trend

A positive June ADP report shows job growth recovering from a disappointing May, but don't expect much acceleration from earlier levels, say Morningstar's Bob Johnson and Vishnu Lekraj.

Jason Stipp: I'm Jason Stipp for Morningstar. We saw a nice bounce-back in the ADP employment report for June. 157,000 private sector jobs were added. That's up from a revised and pretty low number of 38,000 in May.

Does this bode well for Friday's job report?

Here with me to offer the details is Vishnu Lekraj, he is an equity analyst covering the employment sector, and Bob Johnson who is our Director of economic analysis.

Thanks for joining me, guys.

Vishnu Lekraj: Thanks.

Bob Johnson: Good to be here.

Stipp: 157,000 Vishnu was good news to a lot of economists. They expected not quite that many added. Did you think it was surprising? Do you think it's a very optimistic report?

Lekraj: I don't think so. Like we mentioned last month, I thought what happened over the month of May was that businesses were cautious for very good reasons, and now what we're starting to do is catch back up to a normalized level of what we've been doing going all the way back to last fall.

We've been adding between 150,000 and 250,000, according to ADP, every month going back to last fall, and we're just trying to catch back up to that.

What really drove the growth for this report, today, though, was the small businesses in the service sector, which is very good news. I know I say that all the time, but as long as small businesses are growing, that means that there is some good job growth, some good pickup in the economy.

Stipp: So, a quick follow-up there. We saw the ISM services index showed some slowing growth, but we're still seeing jobs added at a pretty good pace in the services sector. How do you reconcile that?

Lekraj: Well, it looks like businesses do see some expansion on the horizon. They don't want to necessary get rid of all their workers. When you dig down into the ISM number, they weren't really adding people, but they weren't subtracting people on par with the slowdown in growth, which means to me that they do expect some solid growth here continuing, just does not necessarily on a robust scale.

Stipp: Okay. Bob, you told me that this number from ADP did not surprise you. Why is that?

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