Jan. 5 (Bloomberg) -- Companies added more workers than forecast in December, a sign that the U.S. labor market was gaining momentum heading into 2012, according to a private report based on payrolls.
The 325,000 increase exceeded the highest projection in a Bloomberg News survey and followed a revised 204,000 gain the prior month, the report from the Roseland, New Jersey-based ADP Employer Services showed today. The median estimate called for an advance of 178,000.
An acceleration in hiring may spur further gains in consumer spending, which accounts for about 70 percent of the world’s largest economy. A Labor Department report tomorrow may show payrolls rose by 150,000, not enough to keep the unemployment rate from rising to 8.7 percent, economists in a Bloomberg survey projected.
“There’s been a sustainable increase in demand behind this, and that’s generally what gets employers to hire more people,” Jonathan Basile, an economist at Credit Suisse in New York, said before the report. “Things are all kind of coming together right now in terms of good news, and I think that’s allowing for a little more restocking of labor.”
The projections for December ranged from 125,000 to 230,000, based on the estimates of 38 economists surveyed by Bloomberg.
The December ADP number may have reflected the so-called purge effect. Workers, regardless of when they are dismissed or quit, sometimes remain on company records until December, when businesses update, or purge, their figures with ADP.
The paycheck processor estimates this change when adjusting its data for seasonal variations and, because there were fewer firings at the end of 2011 than in previous years, ADP may find it more difficult to formulate a projection, according to economists like Peter D’Antonio.
“This huge purge of workers is beyond the scope of normal seasonal adjustment,” D’Antonio, an economist at Citigroup Global Markets Inc. in New York, said in a research note before the report. “So the ADP folks have to make huge assumptions for December that often widely miss the mark.”
ADP’s initial figures for November showed a 206,000 gain, while the Labor Department’s data two days later registered an increase of 140,000 in private payrolls for the month.
Job cuts announced by U.S. employers increased in December from the prior year’s decade low, another report today showed. Planned firings rose 31 percent to 41,785 last month from 32,004 in December 2010, which were the fewest since June 2000, according to Chicago-based Challenger, Gray & Christmas Inc. Job cuts totaled 606,082 for all of 2011, up 14 percent from the previous year.
Goods-producing industries, which include manufacturers and construction companies, had climbed by 52,000 workers, today’s ADP figures showed. Employment in factories added 22,000 jobs.
Service providers took on 273,000 workers.
Companies employing more than 499 workers added 37,000 jobs. Medium-sized businesses, with 50 to 499 employees, added 140,000 workers and small companies increased payrolls by 148,000, ADP said.
Some financial firms added to their payrolls in 2011. JPMorgan Chase & Co., the biggest and most profitable U.S. bank, hired 16,000 workers last year, Chairman and Chief Executive Officer Jamie Dimon wrote in a yearend e-mail to staff.
Policy makers remain concerned about the number of jobless Americans.
Fed on Employment
“While indicators point to some improvement in overall labor market conditions, the unemployment rate remains elevated,” Federal Reserve Chairman Ben S. Bernanke and other members of the Federal Open Market Committee said in a statement at the conclusion of a meeting last month in Washington.
A Labor Department’s report tomorrow may show private payrolls rose by 175,000 in December, according to the Bloomberg survey median. Overall hiring, which includes government jobs, may have climbed after rising 120,000 in November.
The ADP report is based on data from about 337,000 businesses with more than 21 million workers on payrolls. Macroeconomic Advisers LLC in St. Louis produces the data with ADP.
--With assistance from Chris Middleton in Washington. Editors: Vince Golle, Chris Wellisz
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