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ADP: Private Sector Sheds Jobs, Service Industry Adds Positions

Source: WSJ

Posted on 06 Jan 2010

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Private-sector jobs in the U.S. fell by 84,000 in December, the smallest drop since March 2008, and service providers added jobs, according to a national employment report published Wednesday by payroll company Automatic Data Processing Inc. and consultancy Macroeconomic Advisers.

Separately, the U.S. non-manufacturing sector expanded in December, but barely, according to data released Wednesday by the Institute for Supply Management.

The ADP loss is slightly below the 90,000 drop projected by economists in a Dow Jones Newswires survey. The estimated change of employment from October to November was revised by 24,000, from a decline of 169,000 to a decline of 145,000.

"We're clearly moving now in the right direction," said Joel Prakken, chairman of Macroeconomic Advisers, which compiles the survey for ADP. He expects payrolls to turn positive in the first quarter and gain strength in second half.

The ADP survey tallies only private-sector jobs, while the Bureau of Labor Statistics' nonfarm payroll data, to be released Friday, include government workers.

Economists surveyed by Dow Jones expect the BLS will report December payrolls fell by only 10,000, following the 11,000 jobs lost in November. The expected December loss would be the best showing for the labor markets since December 2007, when jobs grew 120,000.

The December unemployment rate is projected to edge up to 10.1% from 10.0%. Friday's report will include benchmark revisions to the household survey which includes the unemployment rate. Macroeconomic Advisers projects the jobless rate will peak above 10% in the first quarter and fall only slowly, remaining above 9% by end-2010.

The latest ADP report showed large businesses with 500 employees or more shed 34,000 jobs and medium-size businesses lost 25,000 workers in December. Small businesses that employ fewer than 50 workers cut 25,000 jobs.

Service-sector jobs added jobs, by 12,000, the first increase since March 2008, while factory jobs dropped 43,000.

Mr. Prakken pointed out that the losses in both factory and construction jobs in December were worse than in November, highlighting the unevenness in hiring.

"You want to see cyclical components in employment rising to feel very secure about the durability of the recovery," he said.

Mr. Prakken also said nonfarm payrolls in the first half will be skewed by government hiring of workers for the 2010 U.S. Census.

ADP, of Roseland, N.J., said it processes payments of one in six U.S. workers, while Macroeconomic Advisers, based in St. Louis, is an economic-consulting firm.

In another Wednesday job report, outplacement firm Challenger, Gray & Christmas said that the number of layoffs announced by U.S. companies in December totaled 45,094, down 10% from November. It was the lowest reading since December 2007, the starting date of the recession. Services Sector Expands Slightly

The ISM's non-manufacturing purchasing managers' index rose to 50.1 last month, from 48.7 in November. The December index was slightly below the 50.5 expected by forecasters surveyed by Dow Jones Newswires. Readings above 50 indicate expanding activity.

The ISM said its December business activity/production index rose to 53.7 last month from 49.6. The new-orders index slipped to 52.1 from 55.1 in November.

The ISM report is comprised mainly of comments from service-sector companies that make up the bulk of the U.S. economy. It follows Monday's ISM report on manufacturing that showed an accelerating expansion in the factory sector, led by a large jump in new orders and production.

Importantly, the employment index edged up to 44.0 last month from 41.6 in November. The ISM's read on employment is not quite as optimistic as the ADP jobs survey released Wednesday that showed service-providers added 12,000 jobs in December.

Inventories, a key sector expected to have added to economic growth in the fourth quarter, showed an increase. The inventory index rose to 51.5 in December, from 45.5 in November.

Price pressures edged even higher. The December prices index rose to 58.7, from 57.8 in November.