U.S. private employment fell unexpectedly for the first time in nearly five years in February, according to a private report Wednesday that dealt another blow to an economy teetering on the brink of recession.
The fall of 23,000 jobs compares with a downwardly revised 119,000 jobs added in January, according to the report by ADP Employer Services.
February's fall was the biggest drop since April 2003.
The ADP report was expected to show 20,000 new private-sector jobs in February, according to the median of estimates from 30 economists surveyed by Reuters.
February's decline was the first monthly contraction in private employment since June 2003, according to the ADP data, and does not bode well for Friday's monthly jobs report by the government. Analysts expect that to show a rise of 25,000 in February non-farm payrolls.
However, the 82 estimates for the payrolls report range widely from a drop of 110,000 to a rise of 100,000.
"The ADP seemed to confirm what the market had already suspected, which is that payrolls would decline moderately in February," said Cary Leahey, economist and managing director at Decision Economics in New York.
"Even though the consensus estimate was for a small increase, in some sense, the market may have expected even a larger decline."
U.S. S&P 500 stock futures pared their gains after the ADP employment report. The dollar also trimmed its gains versus the yen, while U.S. government bonds, which usually benefit from signs of economic weakness, added to their earlier gains.
The ADP report was jointly developed with Macroeconomic Advisers.
Layoffs Fall, But Job Cuts Broader
This negative picture stood in constrast to a separate survey that showed planned layoffs by U.S. companies fell by 14.2 percent in February compared with the same month a year ago, from employment consulting firm Challenger Gray & Christmas.
The read on layoffs suggested there might be some resilience despite in this week's troubling signs for the future, however, stock futures pared gains after the ADP jobs report highlighted possible weakness.
After last month's government labor market report showed U.S. payrolls shrank in January for the first time in nearly 4-1/2 years, economists will be eager to see if this is replicated in February.
The Challengery report showed planned layoffs were down 3.9 percent in February from January, with planned job cuts announced by U.S. employers totaling 72,091 in February, a drop from 74,986 in January and an even steeper slide from 84,014 from February 2007.
Although the Challenger report may lend support to expectations that Friday's payrolls report will manage a small gain, it also indicated that the problems afflicting the troubled U.S. economy are spreading throughout the labor market.
"While job cuts were down slightly, increased layoffs by government agencies and retailers provided further evidence that the impact of the housing slump is spreading beyond the housing and financial sectors,'' the Challenger report said.
Through the first two months of 2008, job cuts totaled 147,077, nearly even with the 146,989 cuts announced in January and February of 2007.
Following last year's mortgage market debacle and subsequent credit crisis, the financial sector has dominated job-cutting activity in recent months and remains in the lead for the year-to-date, with 22,056 job cuts through February.
However, Challenger said that for only the second time in seven months the financial sector was not the top job cutter of the month. In February, it ranked third behind the 10,870 cuts from the government and non-profits sector and 6,918 in retail.
Financial sector cuts totaled 6,267.
"The fact that these two sectors topped the job-cut list in February is clear evidence that the slowdown has moved beyond the housing and financial industries," John A. Challenger, chief executive officer of Challenger, Gray & Christmas, said in a statement.
Job cutting is still well below levels that could be expected during a recession, Challenger said. The 2001 recession resulted in monthly job cuts that averaged about 140,000.
"With companies currently cutting at half that level, it appears that they do not expect this slowdown to be deep or prolonged,'' Challenger said.
Economists polled by Reuters expected Friday's non-farm payrolls report to show a rise of 25,000 jobs. The 82 estimates ranged widely from a drop of 110,000 to a rise of 100,000.