By Shobhana Chandra and Timothy R. Homan - May 3, 2012 12:07 AM GMT+0700
Companies in the U.S. added fewer workers last month, according to data from a private survey, pointing to a cooling in the job market, as the Commerce Department also reported a decline in factory orders in March.
Private employment increased by 119,000, the smallest gain in seven months, after rising by 201,000 in March, Roseland, New Jersey-based ADP Employer Services said. Orders to factories fell 1.5 percent following a 1.1 percent gain in February.
Job seekers wait in line to enter a career fair in New York. Photographer: Michael Nagle/Bloomberg
May 2 (Bloomberg) -- U.S. Representative James Himes, a Connecticut Democrat, talks about the ADP payroll report for April and the economy. Employment increased by 119,000 following a revised 201,000 gain the prior month, according to figures from Roseland, New Jersey-based ADP Employer Services. Himes, speaking with Betty Liu on Bloomberg Television's "In the Loop," also discusses financial market regulations and the Occupy Wall Street protests. (Source: Bloomberg)
May 2 (Bloomberg) -- Martin Feldstein, a professor of economics at Harvard University, talks about the impact of Federal Reserve monetary policy on the stock market. Feldstein, speaking with Sara Eisen on Bloomberg Television's "InsideTrack," also discusses the outlook for the U.S. economy. (Source: Bloomberg)
Stocks retreated as the smaller-than-projected advance in payrolls raised concerns government data in two days will show the world’s largest economy isn’t growing fast enough to reduce unemployment. A report yesterday showing manufacturing expanded in April at the fastest pace in almost a year helped send the Dow Jones Industrial Average to the highest level since 2007.
“Some slowing of job growth was expected,” said Gus Faucher, a senior economist at PNC Financial Services Group Inc. in Philadelphia. “As of now, the job market continues to expand, and we’re getting close to a self-sustaining recovery” where job growth supports wage gains, he said.
The Standard & Poor’s 500 Index fell 0.4 percent to 1,400.94 at 12:52 p.m. in New York. Treasury securities rose, sending the yield on the benchmark 10-year note down to 1.93 percent from 1.94 percent late yesterday.
The median forecast of economists surveyed by Bloomberg News called for a 170,000 increase for ADP. Projections ranged from 100,000 to 200,000, based on estimates of 37 economists.
Uncertain Predictor
Over the previous six reports, ADP has been an uncertain predictor of the Labor Department’s monthly estimate. It was closest in October, when ADP’s first estimate of private payrolls overstated the gain by 6,000, and least accurate in December, when it overestimated employment by 113,000.
The government’s report in two days is projected to show payrolls increased by about 160,000 in April after rising 120,000 a month earlier, according to the Bloomberg survey median. The March data raised concern the job market was cooling, mimicking a slowdown in early 2011 that was precipitated by a jump in fuel costs and disruptions caused by the earthquake and tsunami in Japan.
Ian Shepherdson, chief U.S. economist at High Frequency Economics Ltd., cut his April payroll estimate after the ADP data. Shepherdson, in an e-mail to clients in which he called the figures “disappointing,” lowered his forecast to 125,000 from 200,000.
Sticks to Forecast
Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York, stuck to his projected 175,000 gain. In a note to clients, LaVorgna said that ADP uses figures on jobless claims to produce its estimate, meaning the jump in applications surrounding the Easter holiday probably cut into ADP’s estimate. LaVorgna forecast ADP would show a 125,000 increase.
Elsewhere, joblessness in the 17-nation euro area increased to 10.9 percent in March, the highest since April 1997, from 10.8 percent a month earlier. Separate data showed euro-region manufacturing contracted more than initially estimated last month and unemployment in Germany, the area’s biggest economy, unexpectedly climbed.
In China, a manufacturing index rose in April, signaling a rebound in the world’s second-biggest economy may help to offset constraints on global growth from austerity measures in Europe.
The U.S. economy expanded at a 2.2 percent annual rate in the first quarter after a 3 percent pace in the final three months of 2011, Commerce Department figures showed last week. Growth was led by the biggest gain in consumer spending in more than a year.
Expanding in Illinois
Growing demand is generating employment. Volkswagen AG’s U.S. financing arm said it will expand its Illinois office, adding about 150 new jobs through 2018, as the German automaker expands its American business. VW Credit Inc. on April 20 broke ground on a 30,000-square-foot expansion to about double the size of its facility in Libertyville, Illinois.
The Labor Department’s report on May 4 may also show the jobless rate probably held at 8.2 percent, economists in the survey predicted. Unemployment has exceeded 8 percent since February 2009, the longest stretch of such levels of unemployment since monthly records began in 1948.
The ADP report is based on data representing businesses with more than 21 million workers on payrolls. Macroeconomic Advisers LLC in St. Louis produces the data with ADP.
The Commerce Department’s report showed orders to U.S. factories were restrained by a pullback in demand for aircraft that overshadowed gains elsewhere.
Turbines, Appliances
Bookings fell 1.5 percent after a revised 1.1 percent gain in February, according to figures from the Commerce Department. Turbines and household appliances were among areas showing increases as demand for commercial planes dropped by 48 percent.
The report comes a day after purchasing managers said manufacturing expanded in April at the fastest pace since June as orders, production and employment picked up, indicating the slump in bookings may be short-lived. Exports and consumer spending on big-ticket items like automobiles may be making up for a cooling in business investment, which means factories will continue to support the expansion.
Orders “have been on a see-saw pattern over the past four months, largely because of big swings in civilian aircraft,” Steven Wood, president of Insight Economics LLC in Danville, California, said in a note to clients. “Despite this month’s decline, new orders have been on a rising trend,” he said. “The demand for manufactured goods is recovering moderately.”
To contact the reporters on this story: Shobhana Chandra in Washington at Schandra1@bloomberg.net; Timothy R. Homan in Washington at thoman1@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
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