Weak Jobs Report Could Ignite Recession Worries

The first employmentreport of the year looks set to make or break the trading day for stocks worldwide, as investors' fears about the fate of the U.S. economy grow.

"Continuing employment growth is about all that is preventing us from thinking that the US slowdown will be a recession," ING Bank's Rob Carnell wrote in a market note.

November's strong gain of94,000 nonfarm jobsis unlikely to be repeated, and analysts' predictions vary between 40,000 jobs added in December and a more optimistic 70,000.

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"(Those numbers are) perfectly reasonable giving what's happening to the economy, Philip Shaw, economist at Investec, told "Worldwide Exchange." "If we were to see a couple of negative numbers, our outlook will change and recession would become our central view."

Recent employment numbers have given a mixed picture. The number of U.S. workers filing new claims for unemployment benefits tumbled by 21,000 last week, while the number of people staying on the benefit rolls rose to its highest level in more than two years, a government report on Thursday showed.

Buta Labor Department spokesman attributed much of the steeper decrease in initial claims to the holiday-shortened workweek, which affected the ability of states to estimate data.

Mixed Survey Results

The latest ADP employment report showed the U.S. private sector added 40,000 jobs in December, suggesting that nonfarm payrolls grew by about 65,000.

Meanwhile, a survey from outplacement firm Challenger Gray & Christmas said planned layoffs fell 39.3 percent in December from the previous month and were down 18.7 percent from December 2006. Total 2007 planned job cuts were 8.5 percent lower than in 2006, painting a rosier picture for employment outlook.

Monster.com, a global online recruiting firm, said its Employment Index fell to 169 in December from 183 in November. The index was at 167 a year ago and 168 in January 2007.

The Challenger survey also indicated that the financial sector has taken the brunt of the restructuring, with jobs shed in financial industries totaling 153,105, more than three times the amount at the end of 2006, and nearly twice as much as the second-highest sector, automotive, which lost 78,880 jobs in 2007.

Friday's jobs report may reveal the impact of the subprime crisis on other sectors, which may until now have been overlooked or understated, analysts warned.

"For me, the big detail question is going to be what happens in construction jobs," Andy Lynch from Schroders told "Worldwide Exchange."