ADP Reports 742,000 Private-Sector Job Losses

Apr 1, 2009

KATHLEEN MADIGAN, The Wall Street Journal

Private-sector jobs in the U.S. fell a steep 742,000 in March, according to a national employment report published Wednesday by payroll giant Automatic Data Processing Inc. and consultancy Macroeconomic Advisers.

That's much higher than the 656,000 loss forecast by economists in a Dow Jones Newswires survey.

Separately, U.S. construction spending fell a fifth month in a row during February, but the drop was much smaller than expected, with surprising resilience in the commercial and public sectors. Meanwhile, the Institute for Supply Management's March manufacturing index rose a bit to 36.3 compared to 35.8 last month. The result was better than expected, but still indicates contraction in the industry.

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 the BLS will report job losses totaling 673,000 for March.

That is on top of the 651,000 nonfarm jobs lost in February and the 4.4 million lost since the recession began.

"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 Macroeconomic Advisers.

The new ADP report showed large businesses with 500 employees or more shed 128,000jobs and medium-sized businesses lost 330,000jobs last month. Small businesses that employ fewer than 50 workers cut 284,000 jobs.

Service sector jobs fell 415,000 in March, while manufacturing employment dropped 206,000.

ADP, of Roseland, N.J., claims to process the payment of one in six U.S. workers, while Macroeconomic Advisers, based in St. Louis, is an economic consulting firm.

In another job report, TrimTabs Investment Research said it estimated that the U.S. economy lost between 700,000 and 750,000jobs in March. TrimTabs uses daily income tax withholdings into the U.S. Treasury to estimate changes in employment.

"Investors who think the economy is bottoming out are going to get quite a shock this spring," said Charles Biderman, chief executive of TrimTabs.

But outplacement firm Challenger Gray & Christmas said that major U.S. companies announced 150,411 job reductions in March. That was the second monthly decline.
Manufacturing Continues to Contract
The recession continued to weigh heavily on U.S. factories last month, sending manufacturing activity down for the 14th straight month.

Private research group the Institute for Supply Management reported Wednesday that its March manufacturing index stood at 36.3 from 35.8 the month before. March's reading was above the 35.0 reading expected by economists, although it remained well inside contractionary territory. Readings under 50 indicate contraction.

"The rapid decline in manufacturing appears to have moderated somewhat, as the PMI remains in the mid-30s for a third consecutive month," said Norbert Ore, who directs the survey.

The ISM had little positive to report about the state of factories in March, with the production index at 36.4, from 36.3 in February.
The new orders index came in at 41.2, from 33.1. This was the first time this index was above 40 in seven months.
Hiring had yet another bad month at a reading of 28.1, from 26.1. Inventories continued to shrink, coming in at 32.2, versus the prior month's 37.0.

Meanwhile, inflation pressures continued to retreat, albeit at a less rapid pace, with the prices index at 31.0. It was 29.0 in February.

Construction Spending Falls Again

Total construction spending decreased by 0.9% at a seasonally adjusted annual rate of $967.52 billion compared to the prior month, the Commerce Department said Wednesday. Spending fell 3.5% in January; originally, January spending was seen 3.3% lower.

Wall Street had expected February construction spending would fall by 2.0%. The last time spending climbed was September; it's down 10% year over year. Recent government data showed the construction industry lost 104,000 jobs in February, with employment dropping by 1.1 million since peaking in January 2007. "Employment fell sharply in both the residential and non-residential components of the industry in February," the Labor Department payroll employment report issued March 6 said.
Residential construction spending plunged in February, Wednesday's report said, dropping by 4.1% to $282.6 billion. Residential spending decreased 3.5% in January; it was originally seen 2.8% lower for the month. Year over year, residential spending was 29.2% below the February 2008 level.

Other data indicated strength in the U.S. housing sector during February, with builders breaking ground at an increased rate and sales of new homes rising for the first time in seven months. Housing starts rose 22.2% and sales of single-family homes climbed by 4.7% in February. But, in a reminder the sector is still in a slump, the S&P/Case-Shiller home-price indexes Tuesday showed 14 of 20 major metropolitan areas posted price declines of more than 10% from a year earlier.

And while housing starts surged in February, groundbreakings were 47.3% below the pace of construction a year earlier, in February 2008. Along with weakness in housing is softness in commercial construction. The data Wednesday showed non-residential construction spending making a surprising climb, up 0.5% in February. Outlays rose for office buildings and hospitals, while falling for roads and water supply facilities. Yet year over year, commercial construction has increased a mere 1.3%. Fewer new homes suggest fewer new neighborhoods. Tight credit conditions are restraining commercial construction. The recession has pushed vacancy rates up and lease rates down. The Federal Reserve's latest "Beige Book" report on the economy said demand fell further early this year for commercial, industrial, and retail space. With construction slowing across the U.S., the Beige Book cited "assorted reports (that) suggest that market participants expect this weakness to continue at least through the end of 2009."

Wednesday's Commerce data said construction spending in the private sector during February decreased by 1.6% to $665.9 billion. Spending fell 4.0% in January.

Public-sector construction spending increased 0.8% to $301.7 billion. January outlays fell 2.4%. Federal government construction outlays rose 0.8%, as, surprisingly, did state and local spending, which is much larger than federal spending, in dollars. Tax revenues to governments are flowing less freely amid the recession. Corporate profits after taxes tumbled 28% in October through December from the third quarter, a Commerce Department report issued last week said. And because their assets -- homes and stock market accounts -- have eroded, people possess less value for governments to tax.