Thread: Private sector cuts 742,000 jobs in March, ADP says

ECONOMIC REPORT

Private sector cuts 742,000 jobs in March, ADP says

By Rex Nutting, MarketWatch

Last update: 9:47 a.m. EDT April 1, 2009
Comments: 436

WASHINGTON (MarketWatch) -- The U.S. labor market worsened again in March, as private-sector firms cut 742,000 jobs, signaling another terrible employment report on Friday, according to the ADP employment index released Wednesday.

It was the largest job loss recorded by ADP in its nine-year history.
The report comes two days before the Labor Department reports its estimate for nonfarm payrolls.

Video: Finding a bottom for home prices go to the link below

David Berson, chief economist of PMI Group, talks to MarketWatch's Stacey Delo about how the housing market will rebound before jobs do, and why he expects home prices to bottom for most of the U.S. in early 2010. (April 1)"The pace of job destruction continues to accelerate, which is underscored by the weakness in this report," wrote Ian Pollick, an economist for TD Securities. "The U.S. labor market is emphatically weak, and there is no April-fooling about that."

In March, the goods-producing sector shed 327,000 jobs, the 27th consecutive decline. Manufacturing lost 206,000 jobs, while construction lost 118,000. Construction has now lost 1.1 million jobs since the peak more than two years ago.

The services sector lost a record 415,000 jobs in March.

The ADP index does not include government jobs. To get an apples-to-apples comparison with the Labor Department report, you have to add in about 12,000 jobs typically gained in the public sector. That suggests total payrolls fell by 730,000 in March, compared with the MarketWatch consensus of 663,000 for the Labor Department's estimate. See Economic Preview.

"Despite some recent indications that stock prices, consumer spending, and housing activity may be bottoming out, employment, which usually trails overall economic activity, is likely to remain very weak for at least several more months," said Joel Prakken, chairman of Macroeconomics Advisers, the economic consulting firm that computes the index from anonymous payroll data provided by ADP.

The February ADP index was revised down by 9,000 to a loss of 706,000 compared with the 697,000 initially reported.

In March, small businesses (those with less than 50 employees) cut 284,000 jobs.
Large businesses (with more than 500 employees) cut 128,000 jobs, while medium-sized businesses cut 330,000 in March.

4:00pm 04/01/2009

The ADP sample is taken during the same week of the month as the government's survey, using similar methods.

Rex Nutting is Washington bureau chief of MarketWatch.

Comments: 436

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ECONOMIC PREVIEW

Intense job destruction hasn't let up

Economists see 688,000 jobs lost in March -- and an 8.5% unemployment rate

By Rex Nutting, MarketWatch

Last update: 9:51 a.m. EDT March 29, 2009
Comments: 691

WASHINGTON (MarketWatch) -- American companies are still shedding jobs at a furious pace, with upcoming data likely to reveal the unemployment rate for March rising to 8.5% as nonfarm payrolls contracted by nearly 700,000, economists said.

"The U.S. labor market continues to melt down as companies scramble to adjust their head counts in the face of a deepening economic slump that is among the most serious downturns in the postwar period," wrote Meny Grauman, an economist for CIBC World Markets.

U.S. employment figures for March will be released on Friday. Other top economic indicators of the coming week include the Institute for Supply management index on Wednesday and the consumer confidence index, both for March, on Tuesday.

All of the data are expected to confirm that the nation's economy remains ensnared in a deep recession.

While there have been some tentative signs that the worst may be in the past for consumer spending and home sales, there's little hope for any immediate relief from the intense and dramatic job destruction that began last November.

Indeed, more than 4 million jobs have already been lost in this recession -- and another 2 million or more could find themselves without work before it's all over.

More than 650,000 jobs have been lost in each of the past three months, including 651,000 in February. "We actually expect to see an even-steeper drop in jobs this month," said economists for Morgan Stanley -- namely, 700,000 jobs lost.

Economists surveyed by MarketWatch are looking for payrolls to fall by 688,000 in March, which would be the worst single month for job losses this cycle and the greatest number since 1949. In percentage terms, the loss of 0.5% in each of the past four months is the worst since 1974.
A few forecasters believe the decline in payrolls won't be nearly that bad, but even the most optimistic don't think the Labor Department's March report will be good.

"The general tone of the labor market seems a bit less horrendous than in the December-February period, as layoff announcements have not been quite as plentiful and anecdotal reports also have been suggestive of a possible bottoming," wrote Stephen Stanley, chief economist for RBS Greenwich Capital. He's forecasting a decline of 550,000.

"Still, even our forecast would qualify as dismal, and it will take a much-sharper slowdown in the pace of contraction of employment to fundamentally alter consumer attitudes and the outlook for the economy."
The MarketWatch survey expects the unemployment rate to soar again in March -- to 8.5% from 8.1% in February. It would be the highest since 1983 but still a long way from the peak of 10.8% hit in 1982.

Bowing out

The forecasts for the unemployment rate vary widely among economists, with the main point of debate being how many people simply dropped out of the labor force. Because the unemployment rate depends on how many people are actively looking for work, an increase in discouraged workers actually tamps down the unemployment rate.

An alternative measure of unemployment that includes discouraged workers and those who can find only part-time jobs, which stood at 14.8% in February, is likely to "push well above the 15% mark," said Richard Moody, chief economist for Forward Capital

Many forecasters think the government's gauge of joblessness might get to 10% before it's all said and done. In recessions in the 1950s through 1980s, the unemployment rate started to decline almost as soon as the recession was over.

But in the last two recessions -- 1991 and 2001 -- the unemployment rate continued to rise for many months after the official end of the downturn.
The general view among economists is that the U.S. economy will begin to grow again in the June quarter.

Forward-looking labor market indicators don't point to any job growth for at least six more months, said Joe LaVorgna, domestic economist for Deutsche Bank, who thinks the unemployment rate will hit 10.5%.

Greenwich Capital's Stanley is on the other side of that debate: He thinks the jobless rate might top out near the 9% mark.

The other data

The surprising rise in durable-goods orders for February has boosted hopes that the worst could be over for the manufacturing sector. See story on durable goods.

Alas, few economists think the ISM index will indicate any major improvements in March. The consensus view sees the ISM index rising to 36% in March from 35.8% in February. It bottomed at 32.9% in December.

In this diffusion index, 60% is great, 50% is good, 45% is considered OK, 33% is lousy and so is 36%.

Manufacturers are slashing production, jobs and inventories until supply can be rebalanced with demand. The global slump isn't helping; neither is the extreme caution in U.S. businesses about expanding.

For their part, most consumers remain too afraid to buy many durable goods. Lower prices are a big help, however, to companies that use commodities.

The consumer confidence index hit an all-time low of 25 in February. Economists are forecasting an increase to 28 in March, based on small improvements seen in more frequent temperature-takings, such as the daily Rasmussen index.

Gasoline prices have risen and job insecurity is widespread. But the stock market is up a little, engendering some feelings of optimism, and consumers do have a little more in their pockets, thanks to tax refund season and the weekly tax cut they got from the stimulus enacted shortly after the Obama administration took office.

Rex Nutting is Washington bureau chief of MarketWatch.

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