Ray of light? Private sector cut 'only' 491,000 jobs in April
Just call it another sign, albeit a modest one, that the recession may be bottoming. The private sector cut only 491,000 jobs in April, according to data compiled in the ADP National Employment Report (pdf).
Economists surveyed by Bloomberg News had expected private employers to cut 645,000 jobs in April. Private employers cut a revised 708,000 jobs in March, and 706,000 in February. The job loss totals in April by business size (large -- medium -- small): 77,000 -- 231,000 -- 183,000.
By sector, the services sector -- formerly a U.S. strength during the recent economic expansion -- lost 229,000 jobs. Manufacturing lost 159,000 jobs, its 38th straight monthly decline. The construction sector lost 95,000, its 27th consecutive monthly decline, and brought total construction jobs lost since the January 2007 peak to 1.261 million. However, April's decline was the smallest construction job loss since November 2008.
Don't throw a recovery party just yet
Harvard University Economics Professor Kenneth Rogoff, former chief economist for the International Monetary Fund, said a recovery is approaching but there are no grounds for euphoria, given the likely strength of the recovery.
"We're going to get to the point where the recovery is just not soaring and they're going to do the same again," Rogoff told Bloomberg News Wednesday. "We're going to have a very slow recovery from here."
By that, Rogoff meant that the U.S. economy will likely need a second fiscal stimulus package to compensate for the large demand hole dug by the pronounced recession in the housing sector, stock market and financial services.
The Obama administration expects the $787 billion federal stimulus package passed earlier this year to save or create about 3.5 million jobs nationally.
Economic Analysis: A mildly pleasant report -- pleasant because monthly private job losses came in well below the consensus estimate, and if that trend continues, that would be a strong sign that the recession is bottoming. Still, investors should keep in mind that the more telling statistic, containing both private and public sector job data, is the U.S. Labor Department's monthly payroll statistic, and the April data will be released Friday, May 8 at 8:30 a.m. EDT. That report is expected to show a 630,000-job decline in April after a 663,000 loss in March, according to a Bloomberg News survey of economists.
Investors should keep tabs on the monthly jobs reports by both ADP and the Labor Department because job creation is positively correlated with corporate revenue and earning gains. And as they say on Wall Street, as corporate earnings go, so goes the U.S. stock market.