The job loss was more than forecast, indicating labor market will be slow to recover
By Timothy R. Homan
(Bloomberg)—Companies in the U.S. cut more jobs than forecast in November, indicating the labor market will be slow to mend as the economy strengthens, a private report based on payroll data showed.
An estimated 169,000 jobs were eliminated last month, the fewest since July 2008, according to data from Roseland, New Jersey-based ADP Employer Services today. The figures were forecast to show a decline of 150,000 jobs, according to the median estimate of 32 economists in a Bloomberg survey.
The report signals the job market is still deteriorating and unemployment will probably keep rising even as the economy is emerging from the worst recession since the 1930s. Some economists use the ADP survey in formulating forecasts for the monthly payroll report due from the Labor Department in two days, which may show the pace of job losses slowed.
"We're going to see job losses extend well into 2010," said Ryan Sweet, a senior economist at Moody's Economy.com in West Chester, Pennsylvania, who forecast a loss of 178,000 jobs. "The labor market is crawling toward stabilization. We need the labor market to improve to generate the wage income necessary to support spending."
Stocks climbed, led by metal producers and homebuilders as gold prices rose, and analysts at Credit Suisse Group AG recommended buying shares of KB Home. The Standard & Poor's 500 Index was up 0.4 percent at 1,113.29 at 10:52 a.m. in New York.
After overestimating payroll losses by 103,000 on average in the five months to September, ADP's initial estimate for October was in line with the government's payroll figures.
ADP includes only private employment and doesn't take into account hiring by government agencies. Macroeconomic Advisers LLC in St. Louis produces the report jointly with ADP.
A Dec. 4 report from the Labor Department is forecast to show the unemployment rate held at a 26-year high of 10.2 percent in November, while employers cut 123,000 jobs, according to the median estimate in a Bloomberg survey. The economy lost 190,000 jobs in October.
Economists at Credit Suisse in New York changed their forecast for November payrolls to a 50,000 drop following the ADP report from a previous estimate of no change.
Another report today showed employers last month announced the fewest number of job cuts since the recession began two years as the economic recovery encouraged companies to retain workers. Planned firings fell 72 percent in November to 50,349 from 181,671 during the same month last year, Chicago-based placement firm Challenger, Gray & Christmas Inc. said.
Start of Recession
The economy has lost 7.3 million jobs since the recession began in December 2007, the most of any economic slump since the Great Depression.
Today's ADP report showed a decrease of 88,000 workers in goods-producing industries including manufacturers and construction companies. Service providers cut 81,000 workers.
Employment in construction fell by 44,000, the 34th straight monthly drop, while financial firms decreased jobs by 17,000, ADP said, the 24th consecutive decline for the industry.
Companies employing more than 499 workers shrank their workforce by 44,000 jobs. Medium-sized businesses, with 50 to 499 employees, eliminated 57,000 jobs and small companies decreased payrolls by 68,000, ADP said.
AOL (AOL), the Internet unit being spun off from Time Warner Inc. (TWX), said Nov. 19 it plans to cut about one-third of its workforce over the next several months. The company employs about 6,900 people, spokeswoman Tricia Primrose said.
The ADP report is based on data from 400,000 businesses with about 23 million workers on payrolls. ADP began keeping records in January 2001 and started publishing its numbers in 2006.
To contact the reporter on this story: Timothy R. Homan in Washington at firstname.lastname@example.org