Private Sector Cuts Jobs


Wall Street Journal

By KATHLEEN MADIGAN

Private businesses laid off workers in August as only large companies hired last month, according to data released Wednesday.

Private-sector jobs in the U.S. fell by 10,000 last month, according to a national employment report published by payroll giant Automatic Data Processing Inc. and consultancy Macroeconomic Advisers.

Economists had expected ADP to report a jobs gain of 17,000 in August. The estimated change in employment for July was revised to a gain of 37,000 from an increase of 42,000 first reported.

The ADP survey tallies only private-sector jobs, while the Bureau of Labor Statistics’ nonfarm payroll data, to be released Friday, include government workers.

Economists surveyed by Dow Jones Newswires expect that continued layoffs of government workers hired temporarily for the Census will mean a drop of 110,000 jobs from total August nonfarm payrolls. Among those economists forecasting private-sector jobs within the BLS data, the median projection is for a gain of just 28,000.

The ADP number may cause some forecasters to change their Friday expectations.

The August unemployment rate is projected to edge up to 9.6% from 9.5% in July.

Over time, the U.S. economy has to create between 125,000 and 150,000 jobs a month just to keep the unemployment rate steady. Hiring accelerated to a solid pace in the spring, but has since petered out as market volatility, regulatory uncertainty and weak demand has curtailed economic growth.

The Federal Reserve has focused on the lack of strong job growth. According to minutes of the August 10 Open Market Committee meeting released Tuesday, Fed officials discussed why job growth had been weaker than expected. Reasons included business concerns on regulations, taxes and future health-care costs, plus job mismatch.

But the primary deterrent seemed to be the lack of demand, according to the minutes. Real gross domestic product has slowed significantly this summer.

The latest ADP report showed large businesses with 500 employees or more added 1,000 new employees. But medium-size businesses cut 5,000 workers in August and small businesses that employ fewer than 50 workers dropped payrolls by 6,000.

Service-sector jobs added 30,000 last month, while factory jobs fell by 6,000.

ADP, of Roseland, N.J., says it processes payments of one in six U.S. workers, while Macroeconomic Advisers, based in St. Louis, is an economic-consulting firm.

Other job reports released Wednesday were mixed.

Employers announced job cuts totalling 34,768 in August, according to global outplacement firm Challenger, Gray & Christmas. That was down 17% from the July number and the lowest monthly total since June 2000.

Also on Wednesday, TrimTabs Investment Research said that because of layoffs within the Census Bureau, the economy lost about 65,000 jobs in August with private-sector hiring adding 70,000.

“A sustainable economic recovery requires strong job growth and a healthy housing market, and the U.S. has neither,” said Charles Biderman, CEO of TrimTabs.

TrimTabs bases its employment estimates on an analysis of daily income tax deposits to the U.S. Treasury from all salaried employees.

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