Job reports: Private growth, government cuts

NEW YORK (CNNMoney.com) -- Two employment reports released early Wednesday gave a mixed picture, showing better-than-expected job growth in the private sector but continued weakness in government and non-profit payrolls.

Private-sector employers added jobs for the sixth month in a row in July, according to a report by payroll processing firm Automatic Data Processing (ADP). ADP said private-sector employers added 42,000 jobs to their payrolls during the month, following an upwardly revised 19,000 increase in June.

Economists polled by Briefing.com had expected the report to show the private sector added 25,000 jobs in July.

In a separate report, planned job cuts rose for a third straight month in July, fueled by continued weakness in the government and non-profit sector, according to outplacement firm Challenger, Gray & Christmas Inc. Employers announced plans to eliminate about 42,000 jobs last month, Challenger said. That was up 6% from June, when job cuts rose to 39,000.

Since hitting a four-year low in April, job cuts have risen nearly 9% over the past three months, Challenger said. But it added that downsizing remains well below 2009 levels and cuts in July were down 57% from a year earlier.

John Canally, an economist with LPL Financial, said that while job growth is "tepid," neither of Wednesday's reports suggest the economy is trending toward a double-dip recession. He expects to see continued growth in private sector jobs in future ADP reports and the closely watched government jobs report for July due Friday.

ADP and Challenger's numbers set the stage for the government report, which is expected to show that employers cut payrolls by 87,000 jobs in July, an improvement over June when there were 125,000 jobs cut.

Economists and investors were eager to put a positive spin on the reports. The S&P 500, Nasdaq composite index and Dow Jones industrial averageall opened slightly higher Wednesday following the reports.

The separate jobs reports use different metrics, with ADP measuring only private sector job growth and Challenger compiling planned job cuts in the government and non-profit sectors as well as private industry.

"Both reports are showing some modest improvement," said Mark Vitner, a senior economist with Wells Fargo Securities. "Layoffs did pick up, but they're down 57% from a year ago. It's looking better in the private sector more than the public sector because a year ago states got some stimulus money."

The Challenger report also said overall, planned job cuts for the period January through July are down 64% from the same period last year.

"It is true that job cuts have increased in each of the past three months," said John Challenger, chief executive officer of Challenger, Gray & Christmas. "However, the increases are so slight and the monthly totals so low when compared to recent years, that the trend in no way suggests a reversal of the significant slowdown in job-cut activity witnessed over the past year."

Job reports have been key market-movers during the recession, as economists look to payrolls to gauge the health of the recovery.