ADP Says U.S. Companies Decreased Payrolls by 371,000 (Update3)
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By Shobhana Chandra
Aug. 5 (Bloomberg) -- Companies in the U.S. cut fewer jobs in July as the worst recession since the Great Depression eased, a private report based on payroll data showed today.
The estimated 371,000 drop, higher than economists had forecast, followed a revised 463,000 decline the prior month, figures from ADP Employer Services showed today.
Stabilization in housing and manufacturing and help from the federal stimulus effort will usher economic growth this quarter, economists say. Consumer spending, which accounts for 70 percent of the economy, may be slow to gain speed as home prices fall, wages stagnate and unemployment climbs.
“We have seen the worst, but there is still more pain ahead,” said David Semmens, an economist at Standard Chartered Bank in New York. “Consumer spending will remain weak, especially as we head towards double-digit figures in unemployment.”
Stocks opened little changed after index futures dropped immediately following the report. The Standard & Poor’s 500 index was at 1005.84 at 9:32 a.m. in New York. Treasuries fell, sending yields on benchmark 10-year notes to 3.74 percent from 3.69 percent late yesterday.
The Labor Department’s payrolls report, due in two days, may show employers cut another 328,000 jobs in July and unemployment jumped to 9.6 percent, according to the median forecasts in a Bloomberg News survey.
Worst Job Market
The economy already has lost 6.5 million jobs since the recession began in December 2007, the most of any economic slump since the 1930s.
The ADP report was forecast to show a decline of 350,000 jobs, according to the median estimate of 30 economists in a Bloomberg survey. Projections ranged from decreases of 410,000 to 200,000.
ADP includes only private employment and does not take into account hiring by government agencies. Macroeconomic Advisers LLC in St. Louis produces the report jointly with ADP.
“We’re heading in the right direction and heading there at about the pace we expect,” Chris Varvares, president of Macroeconomic Advisers, said on a conference call today. Job losses may “dwindle toward zero” by the end of this year, and payrolls may turn positive by early 2010, he said.
Employers announced 5.7 percent fewer job cuts in July than the year earlier, according to a report today by Chicago-based placement firm Challenger, Gray & Christmas Inc. Following a 9 percent drop in June, it was the first time since late 2007 that planned firings declined for two months in a row.
Today’s ADP report showed a decrease of 169,000 workers in goods-producing industries including manufacturers and construction companies. Service providers cut 202,000 workers.
Breakdown
Employment in construction dropped by 64,000, while financial firms decreased jobs by 26,000, ADP said.
Companies employing more than 499 workers shrank their workforce by 74,000 jobs. Medium-sized businesses, with 50 to 499 employees, eliminated 159,000 jobs and small companies decreased payrolls by 138,000, ADP said.
Announcements of staff reductions continued this week. General Motors Co. disclosed it may cut more U.S. hourly jobs after an offer of buyouts and early retirements fell about 7,500 workers short of the reorganized automaker’s target.
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: Shobhana Chandra in Washington at schandra1@bloomberg.net
Last Updated: August 5, 2009 09:33 EDT
