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By Jason Stipp and Robert Johnson, CFA | 07-03-2013 02:00 PM

Bracing for Disappointment in June's Job Report

Higher unemployment claims during the reporting period, a seasonal headwind, and past June disappointments stack the deck on the downside for Friday's report, says Morningstar's Bob Johnson.

Jason Stipp: I'm Jason Stipp for Morningstar.

Ahead of Friday's government employment report for the month of June, we got ADP employment for the private sector, also for the month of June, on Wednesday. It showed 188,000 private sector jobs were added to the economy last month.

Here to talk about that number and also his expectations for Friday's government report is Bob Johnson, our director of economic analysis.

Thanks for joining me, Bob.

Bob Johnson: Great to be here.

Stipp: 188,000 was better than a lot of folks had expected for that ADP report. What was your read on that? It looks pretty good.

Johnson: Yes. The ADP report did look pretty good, but ADP has been off a fair amount lately, and we were hopeful that once it moved over to Moody's the numbers would look a little bit more like the government numbers. But three of the last four reporting periods they have underreported the jobs according to what the government has come up with. And this just appears to be a little bit of a catch-up--that they have kind of said, OK, we have got to align our numbers a little bit more closely with the government numbers.

And so it looked like a very big bump. I mean from ~130,000 [in May] to ~180,000 [in June] is really quite a move and would suggests a pretty good employment report on Friday. I would suggest that it is merely catch-up from under-reporting the jobs for the past several months. And by the way, it has been an ongoing trend; since 2012 when the indexes both showed the same number of jobs, now we've gotten to a situation where ADP is about 380,000 [jobs] behind the [government report].

Stipp: So we may see a trend where ADP perhaps looks a little bit better than the government report, if they are going to converge again.

Johnson: Right.

Stipp: So don't get your hopes up too high after this ADP report.

Johnson: Right, yes.

Stipp: But there were some interesting trends just within that report that I think are worth talking about. Construction was a strong point in the ADP report.

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