Private Sector Adds Fewer Jobs Than Expected

Published December 05, 2012

| Reuters

U.S. private sector hiring took a heavy hit in November due to the impact of storm Sandy that ravaged consumers and businesses in the north east, but the huge service sector continued to expand albeit at a modest pace.

The ADP National Employment Report, which is closely watched as it comes two days ahead of the government's monthly employment report, showed that the private sector added 118,000 jobs during the month, below expectations for a gain of 125,000.

The report largely confirmed economists' forecast for a weak reading in the Labor Department payrolls report on Friday. Economists expect the economy added 93,000 jobs in November, down from 171,000 the month before, according to a Reuters poll.

"It's close to what the market was expecting. If Friday's employment report from the U.S. Labor Department comes in similar to this, that would be a good outcome,'' said Terry Sheehan, economic analyst at Stone and McCarthy Research Associates in Princeton, New Jersey. 

A separate report on the U.S. services sector showed a similar dip in hiring during the month but forward looking indicators pointed to faster growth as a rise in new orders and business activity helped offset a fall in employment and prices. The Institute for Supply Management said its services index rose to 54.7 last month from 54.2 the month before. The reading topped economists' forecasts for growth of 53.5, according to a Reuters survey.

U.S. stocks were little changed by midmorning after the data was published. The S&P 500 index, a broad measure of U.S. stocks, traded down 0.1% at 1,406.02 points.

Mark Zandi, chief economist of Moody's Analytics, who helps compile the APD report, said underlying jobs growth was closer to 150,000 in November after discounting the impact of the storm as well as seasonal jobs brought forward at the start of the holiday season.

"Abstracting from the storm, the job market turned in a good performance during the month,'' he said. ``Superstorm Sandy wreaked havoc on the job market in November, slicing an estimated 86,000 jobs from payrolls.'' Zandi said he was seeing little indication that budget negotiations in Washington aimed at averting the so-called "fiscal cliff,'' a series of automatic tax hikes and spending cuts due in 2013, were having a significant impact of hiring.

The current impasse over the fiscal cliff, which could impact the economy to the tune of $600 billion next year, has been blamed for fueling uncertainty and causing corporate managers to delay business decisions.

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