ADP Says U.S. Companies Reduced Payrolls by 522,000

By Shobhana Chandra

Feb. 4 (Bloomberg) -- Companies in the U.S. cut an estimated 522,000 jobs in January as the economy weakened at the start of the year, a private report based on payroll data showed today.

The drop in the ADP Employer Services gauge was less than economists forecast and followed a revised cut of 659,000 for the prior month.

Employers are slashing workers as clogged credit markets and slumps from housing to manufacturing threaten to extend the longest recession in a quarter of a century. Persistent job losses will probably further curb consumer spending, which represents about 70 percent of the economy.

“We’re in for several more months of bleeding on the jobs front,” Joel Prakken, chairman of Macroeconomic Advisers LLC in St. Louis, said on a conference call with reporters.

ADP revised its methodology late last year to help limit differences between its calculations and the government’s payroll numbers. Last month, the new methodology overestimated the drop in December private payrolls by 162,000 after underestimating the count by about an average 116,000 a month in the first 10 months of 2008 before the revision.

The Labor Department may report in two days that the economy lost 535,000 jobs in January and the unemployment rate jumped to a 16-year high of 7.5 percent, according to median forecasts in a Bloomberg News survey. The U.S. lost almost 2.6 million jobs in 2008, the most since 1945.

Less Than Forecast

The ADP report was also forecast to show a decline of 535,000 jobs, according to the median estimate of 23 economists in a Bloomberg News survey. Projections ranged from decreases of 487,000 to 720,000.

Stock index futures rose following the report and Treasury securities were little changed. The Standard & Poor’s 500 futures contract was up 0.6 percent at 8:57 a.m. in New York. The yield on the benchmark 10-year note was 2.88 percent, the same as yesterday’s close.

ADP includes only private employment and does not take into account hiring by government agencies. Macroeconomic Advisers produces the report jointly with ADP.

Job cuts announced by U.S. employers more than tripled in January from a year earlier, led by planned cutbacks at retailers following the worst holiday-shopping season in four decades, the Chicago-based placement firm Challenger, Gray & Christmas Inc. said today. Firing announcements rose 222 percent last month from January 2008, to 241,749. It was the largest total since January 2002, when job cuts reached a record of 248,475, Challenger said.

Breakdown

Today’s report showed a reduction of 243,000 workers in goods-producing industries including manufacturers and construction companies. Service providers cut 279,000 workers. Employment in construction dropped by 83,000.

Companies employing more than 499 workers shrank their workforces by 92,000 jobs. Medium-sized businesses, with 50 to 499 employees, cut 255,000 jobs and small companies decreased payrolls by 175,000.

Businesses continue to announce firings. Rockwell Collins Inc., an aircraft-parts producer, yesterday said it will eliminate 600 positions in coming weeks, and PNC Financial Services Group Inc. said it plans to cut 5,800 jobs by 2011.

The economy will probably “remain in a severe recession with unemployment well in excess of 8 percent” through 2009, PNC Chief Financial Officer Richard Johnson said on a conference call.

The ADP report is based on data from 400,000 businesses with about 24 million workers on payrolls.

ADP began keeping records in January 2001 and started publishing its numbers in 2006.

To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net.