December jobs report Friday could be good news

McClatchy NewspapersJanuary 5, 2012 

WASHINGTON — When the government reports December jobs numbers Friday, there's a good chance that the news may be better than expected. A bevy of labor market indicators released Thursday point to a strong month of hiring.

The ADP National Employment Report, which measures private-sector payrolls, showed an increase of 325,000 jobs in December, almost half coming from small businesses. Forecasters had expected something in the range of 200,000 new private-sector jobs.

"The increase in December was the largest monthly gain since ... December 2010 and nearly twice the average monthly gain since May, when employment decelerated sharply," the report said. "Employment in the private, service-providing sector rose 273,000 in December, which is up from an increase of 176,000 in November. Employment in the private, goods-producing sector increased 52,000 in December."

The ADP report is usually released the Wednesday before the monthly jobs numbers but it came out a day later than usual because of the shortened holiday week. Economists were wary of the ADP's strong number, noting that for December 2010 it also showed a high reading that didn't square with the government's employment numbers that followed.

Why? The provider of the raw data used to make the private-sector estimates retains employees on payroll records until December, regardless of whether they've been employed throughout the year.

"Estimating the size of the year-end purge can be problematic," Jared Franz, an economist with investment giant T. Rowe Price, warned in a note to investors. "For example, ADP's +297,000 initial December 2010 estimate overshot the Labor Department's advance estimate of private employment growth by 184,000."

If the overshoot in 2011 proves similar, it would still suggest private-sector hiring in the ballpark of 150,000 in the government's report. Mainstream forecasters had been expecting something in the range of 140,000 to 160,000 new jobs in December in Friday's report from the Bureau of Labor Statistics.

"Bottom line: Labor market improving, but we doubt we are on the precipice of 300k prints (jobs) in the official measure of private employment," Neil Dutta and Ethan Harris, top economists at Bank of America Merrill Lynch, wrote in a research note. They expect Friday's report to show 190,000 private-sector jobs and a total gain of 175,000, as more government layoffs offset the private-sector growth.

Other indicators are favorable. The government said Thursday that first-time claims for unemployment fell by 15,000 to 372,000 for the week that ended Dec. 31. The four-week average for jobless claims fell to 373,250, a number in line with an expanding economy.

The National Federation of Independent Business, the leading small-business group, reported Thursday that its December survey showed the second-highest reading for job openings and job-creation plans among its members since 2007, and that more firms plan to increase employment than to decrease it.

Outplacement firm Challenger, Gray & Christmas said Thursday that its monthly report showed December job cuts hit a six-month low of 41,785.

"While 2011 went out like a lamb in terms of downsizing activity, with employers announcing an average of just 42,339 job cuts per month over the final quarter of the year, the year-end job-cut total of 606,082 was 14 percent higher than the 529,973 job cuts announced in 2010," the firm said. "However, the 2010 year-end total was a 13-year low. The 2011 total is still well below the recession peak of 1,288,030 annual job cuts reached in 2009."

Most job cuts in 2010 were in government and the troubled financial sector.

ON THE WEB

ADP Report

Challenger Report

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