The payroll processor reported 693,000 jobs lost in the U.S. private sector during the month, 223,000 more than forecast.
Stock futures slid after December’s worse than expected ADP jobs report had investors worrying that Friday’s U.S. official employment snapshot will be equally dreadful.
The U.S. economy shed a much higher than expected 693,000 nonfarm jobs in December, according to the ADP National Employment Report released Wednesday. Economists had forecast a loss of 470,000. This report serves as an important prelude to the Labor Department’s monthly jobless report, though the two are not always aligned.
The weak economic data boosted demand for safe-haven government-issued securities, lowering the yield on the benchmark 10-year Treasury note to 2.48%, from 2.51% late Thursday, while the shorter two-year note's yield increased to 0.82%, from 0.80%, suggesting that investors are looking for longer-term shelter from the macroeconomic storm.
Small and medium-sized firms posted the lion’s share of jobs losses, reportedly laying off 280,000 and 321,000 employees, respectively, during the period. ADP said this indicates that the recession has now spread well beyond manufacturing and housing-related activities.
News of continued weakness in the U.S. labor market comes amid other economic headwinds including falling home prices, curbed consumer spending, rising foreclosures and major declines in assets on Wall Street's balance sheets and Main Street's 401(k)s.
The Federal Open Market Committee meeting minutes released Tuesday indicated that the central bank's outlook was gloomy when it made an unprecedented move in cutting its benchmark federal funds rate to a target range of 0.0% to 0.25% on December 16. However, most members of the policy-setting committee expect economic conditions slowly to improve beginning in the second half of 2009, even as GDP remains negative through the year and unemployment significantly increases into 2010. (See "Fed Negative On 2009; Street Resilient.")
Meanwhile, the Institute for Supply Management's nonmanufacturing index was something of a bright spot Tuesday, showing that contraction in the services sector slowed in December, but the National Association of Retailers said pending home sales fell again in November, and the Commerce Department recorded a 4.6% drop in factory orders in November, the fourth straight monthly decline. (See "Investors Look For Dawn In Dark U.S. Economy.")
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