ADP Surprises With Biggest Job Loss in Nearly 6 Years - Economy * US * News * Story

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ADP Surprises With Biggest Job Loss in Nearly 6 Years

Topics:Employment | Economy (Global) | Economy (U.S.)

By: Reuters | 02 Jul 2008 | 09:02 AM ET

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U.S. private-sector employers slashed 79,000 jobs in June, the largest drop since November 2002, according to a report by ADP Employer Services released Wednesday that may spell bad news for the government's labor market report later this week.

AP
In May, the private sector added 25,000 jobs, revised down from an originally reported 40,000 jobs, the report said.

The median of estimates from 31 economists surveyed by Reuters was for the ADP report to show a drop of 20,000 jobs in June.

Stock futures pared their gains after the weaker-than-expected report and the dollar extended its losses versus the euro.

U.S. government bonds, which perform better during times of economic weakness, rose after the report as investors bet the weakness in the labor market meant the Federal Reserve was less likely to raise interest rates to fight inflation.

The news does not bode well for the government's more comprehensive employment report, which is due on Thursday and is usually one of the biggest events on the monthly data calendar.

INVESTOR TAKEAWAY

"The June ADP report offered another weak reading for employment. It looks like we're still seeing job cuts as economic growth is very weak," said Gary Thayer, senior economist at Wachovia Securities in St. Louis, Missouri.

"It suggests that the June employment numbers will probably also be weak. It keeps the Fed on hold for a while."

The ADP report was jointly developed with Macroeconomic Advisers.

Layoffs Fall, but Higher Than Year-Ago

Meanwhile, a separate private survey showed planned layoffs at U.S. companies fell 21 percent in June from May's 29-month high, but were 47 percent above June 2007, while second-quarter cuts were the highest since late 2005.

Planned job cuts at U.S. companies totaled 81,755, compared with 103,522 in May and 55,726 in June 2007, employment consulting firm Challenger, Gray & Christmas reported.

Job cuts in the second quarter totaled 275,292, the highest quarterly total since the fourth quarter of 2005.

The financial sector had the most planned cuts for the third month this year as the credit crisis continued to take a toll.

Jobs shed in financial industries in June were at 19,227, nearly 24 percent of all planned cuts, leading by far the government/non-profit and telecommunications sectors, both with less than 11,000 layoffs in the month.

"Downsizing in the financial sector has remained heavy but now we are seeing increased job cuts in other non-housing-related industries, mostly due to the added burden of skyrocketing oil prices," said John A. Challenger, chief executive officer of Challenger, Gray & Christmas. (For more analysis from Challenger, see full interview.)