Last updated: December 5, 2012 4:00 pm

Sandy drags down US private jobs growth

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Superstorm Sandy, which hit the northeast US in late October, hampered growth in private sector jobs last month as companies were temporarily forced to close operations.

Businesses added 118,000 new jobs in November, ADP, the payroll processor, said on Wednesday. While the report contained upward revisions to the previous two months, November’s figure came in well below October’s 157,000 and economists’ expectations of 125,000 new jobs.

Mark Zandi – chief economist of Moody’s Analytics, a subsidiary of the rating agency – said: “Sandy wreaked havoc on the job market in November, slicing an estimated 86,000 jobs from payrolls. The manufacturing, retailing, leisure and hospitality and temporary help industries were hit particularly hard by the storm.”

The data were released before Friday’s employment report from the labour department, which is expected to show that 80,000 jobs were created by government and businesses in November. The payroll report is also likely to reflect an impact from Sandy, economists said.

The ADP report is constructed primarily from businesses’ electronic payroll records, representing approximately 406,000 US corporate clients and 23m employees – more than 20 per cent of all private sector workers.

Other data released on Wednesday showed that the manufacturing and services industries had shrugged off the effects of superstorm Sandy and held up well in the face of fiscal cliff uncertainties.

Factory orders increased slightly in October, beating expectations, after two months of distortions driven by extraordinarily sharp swings in aircraft orders.

The commerce department said factory orders rose 0.8 per cent following a 4.5 per cent rise in September. Economists surveyed by Bloomberg had forecast a 0.1 per cent decline.

The report represents the dollar level of new orders for both durable – those meant to last more than three years – and non-durable goods.

Core orders for capital goods were revised up in October after a four-month stretch of weak readings – rising 2.9 per cent after a preliminary 1.7 per cent gain.

Manufacturers have said macroeconomic weakness and the looming spending cuts and tax increases due to come into effect in the US at the start of the new year have driven businesses to cut back on investment and recruitment. ISM’s manufacturing index, released on Monday and the most timely measure of the industrial sector, fell in November to its lowest level since July 2009.

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The Institute for Supply Management’s non-manufacturing index published on Wednesday unexpectedly rose to 54.7 in November from 54.2 in October. Readings above 50 signal expansion. Economists had projected the index would dip to 53.5.

The services sector index surveys more than 375 businesses from industries including agriculture, building, transport, communications and retail trade on their thoughts on activity, new orders, employment and supplier deliveries

Although the services sector is less dependent on capital spending and export demand, which has weakened as the eurozone economy contracts, it is also under pressure.

While the new orders gauge for ISM’s latest data is at 58.1, the best reading since March, the employment indicator is at 50.3, the worst since July.

“We remain concerned too that the lagged behind effect of the rise in gas prices in the summer and early fall will soon weigh on the survey, which often lags behind movements in core retail sales. Consumers remain cash-strapped, so we don’t expect sustained further gains in the index,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

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