ADP Says U.S. Companies Cut 20,000 Jobs in February

by TMT Newswire

By Timothy R. Homan -- March 3 (Bloomberg) -- U.S. companies in February cut the fewest jobs in two years, according to data from a private report based on payrolls.

The 20,000 decline was in line with forecasts and followed a revised 60,000 drop the prior month, data from ADP Employer Services showed today. Over the previous six months, ADP’s initial figures have overstated the Labor Department’s first estimate of private payroll losses by as little as 10,000 in January to as much as 151,000 in November.

Companies are hesitant to add workers until they see sustained gains in sales as the U.S. emerges from the worst recession since the 1930s. Economists surveyed by Bloomberg News anticipate the government’s report March 5 will show U.S. payrolls declined by 50,000, in part because snowstorms in parts the country caused some businesses to close.

“This report really is pretty encouraging,” Joel Prakken, chairman of Macroeconomic Advisers LLC. in St. Louis, said in a press conference. He said job gains should come in the next month or two. Macroeconomic Advisers produces the report with ADP.

The ADP figures were forecast to show a decline of 20,000 jobs, according to the median estimate of 31 economists surveyed by Bloomberg. Projections ranged from a loss of 150,000 to a 25,000 gain.

Weather’s Influence

Most economists agree the severe winter storms in February will probably depress the Labor Department’s payroll figures.

“In the ADP data, weather doesn’t matter much at all,” said Prakken. “If you remain on the ADP computerized log, you’re counted as employed.” The Labor Department’s figures are based on whether an employee worked during the week that included the 12th of the month, which may have been affected by the storms, he said, and any influence will be reversed this month.

ADP includes only private employment and doesn’t take into account hiring by government agencies.

Employers last month announced the fewest job cuts in more than three years, according to a report today by the job placement firm Challenger, Gray & Christmas Inc. Planned firings fell 77 percent in February to 42,090, the least since July 2006, from 186,350 a year earlier, the Chicago-based company said. Announcements decreased from 71,482 in January.

The Labor Department’s report in two days is forecast to show the unemployment rate climbed to 9.8 percent in February, the first increase since October, from 9.7 percent the previous month, according to the Bloomberg survey median.

Job Losses

The economy has lost 8.4 million jobs since the recession began in December 2007, the most of any downturn in the post- World War II era. In January, U.S. payrolls unexpectedly shrank by 20,000.

Today’s ADP report showed a decrease of 37,000 workers in goods-producing industries including manufacturers and construction companies. Service providers added 17,000 workers.

Employment in construction fell by 41,000, while factories added 3,000 jobs, the first gain since January 2008, ADP said.

Companies employing more than 499 workers shrank their workforces by 10,000 jobs. Medium-sized businesses, with 50 to 499 employees, added 8,000 jobs and small companies decreased payrolls by 18,000, ADP said.

International Business Machines Corp., the world’s largest computer-services provider, fired more than 1,700 workers, mostly in the U.S., according to Lee Conrad, national director for the Alliance @IBM, which represents some employees. The cuts represent less than 1 percent of the Armonk, New York-based company’s workforce.

Recalling Workers

Other companies are adding to payrolls. Caterpillar Inc., the world’s largest maker of bulldozers and excavators, is recalling 100 workers at its large-engine center in Lafayette, Indiana, spokeswoman Bridget Young said in a Feb. 18 e-mail.

The Peoria, Illinois-based firm forecasts sales will increase as much as 25 percent this year and last month announced that it recalled more than 500 workers. “Caterpillar may be recalling or hiring employees in business units at various facilities this year based on demand fluctuation,” Young said.

The ADP report is based on data from about 360,000 businesses with more than 22 million workers on payrolls. ADP began keeping records in January 2001 and started publishing its numbers in 2006.

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

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