While the number of job cuts continues to decline, the US unemployment rate remains at a 26 year high of 10.2%. Private sector job losses in November exceeded economists’ projections with the manufacturing, construction, service and financial industries continuing to post job losses. For more on this, see the following article from Money Morning.
U.S. job losses in the private sector slowed in November but still exceeded economists’ projections, a report by payroll-processing firm Automatic Data Processing (Nasdaq: ADP) indicated Wednesday.
The report showed U.S. companies cut an estimated 169,000 jobs in November, whereas economists had been expecting a loss of 150,000 jobs, according to a survey by Bloomberg News.
The report sets the stage for the Labor Department’s highly-anticipated November unemployment report, to be released Friday. That report is expected to show 123,000 job losses, keeping the unemployment rate steady at a 26 year-high of 10.2%, according to the same survey.
The report indicates that the job market is still deteriorating as the economy struggles to recover from the worst recession since the 1930s. The economy has shed 7.3 million jobs since the recession began in December 2007, the highest number of job losses since the Great Depression.
“We’re going to see job losses extend well into 2010,” Ryan Sweet, a senior economist at Moody’s Corp.’s (NYSE: MCO) Economy.com, told Bloomberg. “The labor market is crawling toward stabilization. We need the labor market to improve to generate the wage income necessary to support spending.”
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Manufacturing and construction companies continued to suffer, losing 88,000 workers in November the report showed. Employment in construction fell by 44,000, the 34th straight monthly drop. Service providers cut 81,000 workers, with financial firms cutting 17,000 positions, the 24th consecutive decline for the industry, ADP said.
The ADP report includes only private employment based on data from 400,000 businesses with about 23 million workers, and doesn’t account for hiring by government agencies.
ADP also has a history of overestimating job losses, overshooting the mark by an average of 103,000 in the five months prior to September. The company revised its October estimate, saying 195,000 jobs were lost, down from the 203,000 it originally reported.
Signs of Improvement as Jobs Summit Looms
In a sign that job losses may be abetting, November was the eighth month in a row that job cuts fell after peaking at 736,000 in March, ADP said.
Meanwhile, a separate report from outplacement company Challenger Gray & Christmas showed that company’s planned layoffs dropped to 50,349 in November, 9.6% fewer than October’s 55,679 and down 72% from 181,671 last year.
“Most industries are seeing job cuts subside,” Chief Executive Officer John Challenger said in a statement obtained by CNN.Money.com. “Unfortunately, the second half of the job-market equation – hiring – has not shown any signs of an imminent rebound.”
The news comes as President Barack Obama is scheduled to meet today at a “jobs summit” with labor representatives, financial experts and other business leaders to explore ways to overcome the stubborn unemployment problem.
“There are two ways you can go: hope more government spending translates to employment, or give tax incentives for hiring,” Joel Prakken, chairman of Macroeconomic Advisers LLC said in a conference call.
But because most hiring will have to come from the private sector, Prakken is not optimistic that much can be done to keep unemployment from peaking at 10.4% or 10.5%.
“Looking forward, we expect several months of declines,” said Prakken. “But the losses will get smaller and we should see the first positive number in February’s data.”
The U.S. economy will not return to “full employment,” defined as 5% unemployment, until as late as 2014, he said.
This article has been republished from Money Morning. You can also view this article at Money Morning, an investment news and analysis site.