ADP shows US job cuts at two-year low

ADP shows US job cuts at two-year low
By Alan Rappeport in New York
Copyright The Financial Times Limited 2010
Published: February 3 2010 13:59 | Last updated: February 3 2010 16:23
http://www.ft.com/cms/s/0/eab0dfae-10c6-11df-975e-00144feab49a.html


Companies in the US last month cut jobs at their slowest rate in two years, in a sign that the labour force is slowly mending.

Separately on Wednesday, the Institute of Supply Management’s latest survey of the services sector showed activity rising for the first time in three months and climbing to the highest level since May 2008.

Private businesses shed 22,000 workers in January, according to a survey by ADP employer services. It was the 10th month running that the pace of job losses declined and was better than economists predicted. December’s figures were also revised, showing 61,000 jobs lost instead of the previously estimated 84,000.

“The labour market is deteriorating at a decelerating pace,” said Joshua Shapiro, chief US economist at MFR.

The services sector continued to outshine goods producers, with services companies adding 38,000 jobs. It was the second consecutive month that the sector added workers.

Workers at businesses that produce goods continued to be punished in January, with 60,000 employees shed from payrolls. Manufacturing saw some improvement, as the decline of 25,000 workers was the smallest drop since January 2008.

Construction workers remain under pressure, with 37,000 jobs lost. Volatility in the residential and commercial real estate markets have hit these workers especially hard and the industry has lost 1.8m in the last two years.

Big businesses and small businesses cut 19,000 jobs and 12,000 jobs respectively. However, medium-sized companies added employees for the first time in a year.

Wednesday’s ADP survey sets the stage for Friday’s closely watched government employment report. Analysts expect the economy might have added 10,000 jobs last month while the unemployment rate held steady at 10 per cent.

Meanwhile, ISM’s non-manufacturing index rose to 50.5 in January from 49.8 the prior month, slightly trailing expectations. A reading greater than 50 signals expansion.

The expansion was driven by improvement in employment and growth in prices. However services jobs continued to shrink, but at a slower pace, during the month, according to ISM. Of the industries surveyed, four expanded and 11 contracted.

“The non-manufacturing index is being weighed down by the continuing weakness of retail sales and domestic demand in general,” said Paul Ashworth, senior US economist at Capital Economics.

The non-manufacturing figures were weaker than the robust ISM data earlier this week showing strength in the factory sector.