ADP Reports 10,000 Private Sector Job Cuts in August

U.S. employment suffered another setback as the private sector unexpectedly cut 10,000 jobs in August, ADP announced Wednesday. A Bloomberg survey had forecast that private employers would add 17,000 jobs in the month after adding a revised 37,000 jobs in July, down slightly from the previously estimated 42,000 gain. Private employers hired 19,000 workers in June and 57,000 in May.

August's loss was the first monthly decline in seven months, with ADP adding that the drop "confirms a pause in the recovery already evident in other economic data." Over the past six months the average monthly gain in employment has been 37,000, with ADP adding that it sees "no evidence of acceleration."

Separately, private placement firm Challenger, Gray & Christmas said planned layoff announcements by U.S. employers decreased 9% to 37,768 in August from 41,676 in July -- the first decline in four months, Reuters reported Thursday. Jobs cuts are are now 55% below levels recorded a year ago. So far in 2010, employers have announced 374,121 job cuts, down 63% compared to the same period for 2009, when they announced 1.02 million layoffs.

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ADP reported that job totals by business size (large, medium, small) were gains of 1,000 jobs, and losses of 5,000 and 6,000, respectively.

In August, construction employment declined 33,000, bringing the number of jobs lost in that sector since its January 2007 peak to 2.75 million. Financial services lost 5,000 jobs, the goods producing sector shed 40,000 and manufacturing dropped 6,000. On the positive side, services added 30,000 jobs -- the sector's seventh straight monthly gain.

A Troubling Retrenchment

Overall, the August private sector report was a disappointment, and as ADP noted, it further confirmed the slowdown in economic growth that's clearly evident in manufacturing and housing, and in the increase in initial jobless claims.

Given the troubling labor market retrenchment, policymakers need to stay focused on job creation because the U.S. economy needs to create 100,000 to 125,000 jobs per month just to keep the unemployment rate from rising.

Investors should also keep in mind that the more-telling job statistic, containing both private and public sector job data, is the U.S. Labor Department's monthly nonfarm payroll report, and the August data will be released Friday, Sept. 3 at 8:30 a.m. ET. That report is expected to show a 100,000-job decline in August after losing 131,000 jobs in July, according to a Bloomberg survey of economists.