ADP Private Payrolls Rise a More-than-Expected 172,000 in June

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Private payrolls in June rose at the best clip in three months, suggesting U.S. firms continue to create jobs at a healthy pace and alleviating some concerns over May's marked slowdown.

Private payrolls across the U.S. increased 172,000 last month, according to payroll processor Automatic Data Processing Inc. and forecasting firm Moody's Analytics. Economists surveyed by The Wall Street Journal expected an increase of 151,000.

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May's gain, initially reported at 173,000, was revised down slightly to 168,000.

"Job growth revived last month from its spring slump," said Mark Zandi, chief economist of Moody's Analytics. He said the employment market remains healthy outside of the struggling energy and manufacturing sectors, "and Brexit won't help," but small- and midsize companies are hiring at a solid pace, he said.

U.S. job growth slowed in recent months, with the government's May employment report showing considerably weaker growth in payrolls than had been expected and previous months' gains revised down, the Federal Reserve said in its June meeting minutes released Wednesday. While a strike at Verizon Communications Inc. dragged down May's payroll figure, weakness was broad-based with construction companies, manufacturers and miners together cutting 36,000 jobs, temporary head counts dropping by 21,000 and service providers significantly slowing hiring.

ADP's May report didn't similarly reflect softer hiring, largely because of its methodology. The report is based on data collected from ADP clients in addition to lagged government figures -- it doesn't aim to replicate the nonfarm payrolls survey -- and it didn't include the Verizon strike or adjust for it.

Some job market indicators, such as the number of Americans filing for unemployment benefits and those quitting their jobs, have continued to suggest a healthy market.

The June ADP report comes a day before the Bureau of Labor Statistic's employment situation report. Economists polled by The Wall Street Journal expect nonfarm payrolls to have risen 165,000 last month, up from 38,000 in May. The unemployment rate is expected to tick up to 4.8% from 4.7%, where it unexpectedly fell because of sharp labor market shrinkage.

Write to Lisa Beilfuss at lisa.beilfuss@wsj.com