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November 2, 2011 8:51 pm
US companies added more jobs than expected in October while planned lay-offs fell to the lowest level in four months in a sign that the job market is stabilising, though at a weak level of activity.
The private sector added 110,000 jobs last month, beating economists’ estimates of 100,000 new positions, and September’s total was revised up to 116,000 from 91,000, according to ADP, the payroll processor.
“The good news is that employment growth appears stable, but the bad news is that gains of 100,000 or slightly less a month won’t be sufficient to reduce the unemployment rate or generate a pick-up in income growth,” said Paul Ashworth, chief US economist at Capital Economics.
Analysts were looking to the US labour department’s non-farm payrolls report, due on Friday, to see whether the boost in economic growth seen in the third quarter will be reflected in hiring trends.
Figures last week showed that third-quarter growth accelerated to 2.5 per cent, following an anaemic 0.4 per cent in the first three months of the year and 1.3 per cent in the second quarter.
Economists polled by Bloomberg were expecting Friday’s figures to show the US economy added 95,000 jobs in October, led by 125,000 new private-sector positions.
“ADP data is not going to change any [non-farm payroll] forecasts and is consistent with a pretty steady labour market in the last four months,” said Alan Ruskin, strategist at Deutsche Bank.
The latest ADP report shows growth entirely concentrated in the services sector, which added 114,0000 workers. Goods-producing companies eliminated 4,000 positions.
Manufacturers continued to downsize for a third month, cutting 8,000 jobs in a reflection of “uncertainty around investment and hiring,” said Gary Butler, ADP chief executive. The manufacturing sector slowed in October, according to the Institute for Supply Management amid concerns over domestic growth and global turmoil fuelled by the eurozone debt crisis.
Employment growth in October was also stratified by company size. Small and medium-sized firms accounted for the entire monthly rise, adding 58,000 and 53,000 jobs respectively, while companies employing more than 499 people cut 1,000 jobs – the first reduction in five months.
“Big manufacturing exporters have employment on hold, probably because of the deterioration in economic growth in Europe and Asia, but smaller domestically focused services firms are still expanding,” Mr Ashworth said.
Meanwhile, planned job cuts slowed from a two-year high in September to 42,759 in October, the lowest level since June, according to a separate report from Challenger, Gray and Christmas, the placement company. That still left lay-off announcements 12.6 per cent above their level of a year ago, however.
The biggest pullback in cuts came in the financial and government sectors, the report said. That was unsurprising following September’s report, in which the majority of cuts were attributable to the US Army’s five-year troop reduction plan and the announcement of 30,000 cuts at Bank of America.
“Job cuts in government and financial services dropped significantly last month, but the two sectors are not out of the woods, by any means. Most of the government cuts this year were at the state level. We have yet to see the full impact of mandated federal spending cuts. Anticipated cuts at the US Post Office alone could result in more than 200,000 job cuts,” said John Challenger, chief executive of Challenger, Gray and Christmas.
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