US jobs market still bleeding despite private hirings

WASHINGTON DC, United States—A key US government report Friday is expected to show already high unemployment nudging up as firms remain reluctant to hire in large numbers.

Most economists believe July saw non-farm payrolls fall by 87,000 and the unemployment rate edge up to 9.6 percent, raising more doubts about the fragile economy recovery.

The ominous forecast came even after payrolls firm ADP reported Wednesday a larger-than-expected number of jobs were created in July.

Some 42,000 private-sector jobs were opened up last month, higher than the 19,000 reported in June.

The number startled analysts who had expected 25,000 jobs created in July, the sixth consecutive monthly increase in hiring.

But ADP warned that the private job increases so far this year had averaged a modest 37,000, “with no evidence of acceleration.”

The caution came as the economic recovery from a brutal recession threatens to stall, with persistent unemployment dampening consumer spending, traditionally a linchpin of the US economy.

The ADP survey tracks only private-sector jobs, while the labor department’s non-farm payroll data include government workers.

The private sector is thought to have created about 82,500 jobs in July but government employment is believed to have fallen 169,500 as more temporary jobs disappeared.

Temporary hiring for a government population census had peaked in May and “for this reason, Friday’s figure… might be weaker than today’s estimate for non-farm private employment” in the ADP report, the payrolls firm said.

The ADP numbers were hardly encouraging, considering the 8.5 million jobs lost since the recession struck in December 2007 and the enormous pump priming efforts by President Barack Obama’s administration.

But analysts said that unemployment could have surged even further if not for the hundreds of billions of dollars pumped into the world’s largest economy.

“If the federal government had not intervened to rescue the economy, the unemployment rate would be close to 16 percent today,” according to the Economic Policy Institute, a non-profit Washington think tank.

ADP estimated employment in the service sector rose by 63,000 in July while hiring in the manufacturing sector decreased 6,000, the first slide in six months.

Large businesses, defined as those with 500 or more workers, saw employment remain flat.

Hiring among medium- and small-size businesses increased by 21,000 each while employment in the financial services sector, which has declined for more than three years, dropped 1,000, the smallest decline since June 2007.

The number of new additions to private payrolls “is quite disappointing” and “hardly enough to make any real dent in the unemployment rate,” said economist Joel Naroff with Naroff Economic Advisors.

“If ADP has it right, we are not likely to find a whole lot of reasons to be exuberant about the job market when the employment report is released on Friday,” he said.

Layoffs seem to be rising, according to placement firm Challenger, Gray, and Christmas on Wednesday.

Employers announced 41,676 planned job cuts last month, up from 39,358 in June.

Still, some analysts remain hopeful. “A 100,000 gain (in private employment) is better than nothing but it is not enough to generate a sustained decline in the unemployment rate,” said economist Ian Shepherdson at High Frequency Economics.

“We don’t see this picture changing much until next year.” –Agence France-Presse