Grim Job Market Deals Economy Another Blow

By Reuters -  |  Posted 2008-03-05 Email Print this article Print
 
 
 
 
 
 
 

Economic optimists take heart from separate report showing planned layoffs by U.S. companies fell in February.

NEW YORK (Reuters) - The weakening job market dealt another blow to the struggling economy on Wednesday, while more bad news emerged from the inflation front.

U.S. private employment fell unexpectedly for the first time in nearly five years in February, according to a private report that does not bode well for the government's key U.S. payrolls release on Friday.

Economic optimists may take heart from separate report showing planned layoffs by U.S. companies fell in February, but even that data suggested that the housing-led economic slowdown was spreading to other sectors.

"The headline (ADP) number showed a decline of 23,000, which was the first decline in this series since the economy was coming out of the last recession so it is notable," said Joel Prakken, chairman of Macroeconomic Advisers in St. Louis, Missouri, a joint developer of the ADP report.

This left investors braced for Friday's monthly jobs data. Analysts expect that to show an increase of 25,000 in February non-farm payrolls but their estimates range widely from a drop of 110,000 to a rise of 100,000, according to a Reuters poll of economists.

"The ADB report has given us a heads up that the jobs report on Friday could be worse than expected. All the other jobs indicators are also consistent with a softening U.S. labor market, "said Shaun Osborne, chief currency strategist at TD Securities in Toronto.

U.S. productivity was slightly better than earlier estimated in the fourth quarter but labor costs were also considerably higher, presenting an inflation dilemma for the Federal Reserve, which has cut interest rates aggressively to shore up the economy.

EAGER TO SEE

After last month's government labor market report showed U.S. payrolls shrank in January for the first time in nearly 4-1/2 years, economists will be eager to see if this is replicated in February.

The fall of 23,000 private sector jobs compares with a downwardly revised 119,000 jobs added in January, according to the report by ADP Employer Services.

February's fall was the first monthly contraction in private employment since June 2003 and the biggest drop since April 2003, according to ADP data.

The ADP report was expected to show 20,000 new private-sector jobs in February, according to the median of estimates from 30 economists surveyed by Reuters.

U.S. fourth-quarter non-farm productivity growth was revised up to 1.9 percent from the previous 1.8 percent.

However, non-farm unit labor costs were also revised up, to 2.6 percent from 2.1 percent.

Planned layoffs by U.S. companies fell by 14.2 percent in February compared with the same month a year ago, according to a report that might mitigate worries ahead of Friday's payrolls report.

Employment consulting firm Challenger, Gray & Christmas Inc. also said on Wednesday that planned layoffs were down 3.9 percent in February from January.

Planned job cuts announced by U.S. employers totaled 72,091 in February, a drop from 74,986 in January and an even steeper slide from 84,014 from February 2007.

"While job cuts were down slightly, increased layoffs by government agencies and retailers provided further evidence that the impact of the housing slump is spreading beyond the housing and financial sectors," the Challenger report said.

U.S. stocks were up slightly in early trade.

U.S. government bonds, which usually benefit from signs of economic weakness, were up on the day, while the dollar eased slightly.

(Reporting by Burton Frierson; Editing by Andrea Ricci)



 
 
 
 
 
 
 
 
 
 

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