Private sector job cuts slow in January
The U.S. private sector cut more than half a million jobs in January, according to a report that indicates the labor market will continue hemorrhaging for another year.
ADP Employer Services said on Wednesday that private employers cut 522,000 jobs in January versus a revised 659,000 jobs lost in December. The December job cuts were originally reported at 693,000.
Though the rate of job losses slowed slightly, and was also less severe than analysts expected, there is more pain in store even if the government gets a plan in place to stimulate the moribund economy.
“It’s too late at this point to prevent a fairly significant further rise in the unemployment rate,” said Joel Prakken, chairman of Macroeconomic Advisers, which jointly developed the ADP report.
“And all that the stimulus can do is to limit how high the unemployment rate will go in this cycle.”
Prakken said he expected the unemployment rate to crest at more than 8 percent and “that would entail job losses of somewhere around 3 million, I would say, over the next 12 months.”
The U.S. unemployment rate jumped to 7.2 percent in December, the highest in 16 years, as a housing market crash, financial crisis and sharp decline in the auto industry led to widespread lay-offs cash advance.
The U.S. economy contracted at an annual rate of 3.8 percent during the last three months of 2008. Prakken said he expected “another large decline in output in the first quarter.”
In the ADP report, economists had expected 530,000 private sector job cuts in January, according to the median of 27 forecasts in a Reuters poll, which ranged widely from a drop of 720,000 to losses of 495,000.
U.S. stock index futures initially gained more ground after the data. U.S. government bonds, which usually benefit from weak economic data, pared their gains after the ADP report.
As of its December release, the ADP methodology was revised in an effort to align it more closely with the government’s non-farm payrolls report, which is due on Friday. The Labor Department report is expected to show 525,000 jobs were lost throughout the economy in January.
The ADP data series dates back to January 2001.
(Reporting by Burton Frierson; Editing by Tom Hals)