ADP Report: 79,000 Jobs Lost


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Job-hunters faced a bleak start to summer, with employers shedding another 79,000 positions in June, according to ADP's(ADP) monthly report.

Declines were much broader than previous months, as continued weakness in the housing and financial sectors bled into other areas. Even the services sector -- which had not posted a decline since November 2002 -- slashed 3,000 jobs over the course of the month.

The overall drop was nearly four times as high as the median estimate of economists surveyed by Bloomberg News. ADP also downwardly revised its May figure to an addition of 25,000 private, nonfarm jobs, rather than the initially reported 40,000. Figures are adjusted for seasonal shifts.

Sectors related to the housing market -- including residential construction, home sales and mortgages -- were especially hard hit again, as the housing sector struggles to find solid ground. Construction companies dropped 34,000 employees, the 19th consecutive monthly decline. Since the height of the housing market in August 2006, the sector has lost 349,000 jobs.

Joel Prakken, chairman of Macroeconomic Advisers, which develops the report with ADP, noted that small businesses posted weak growth, despite having been the "the savior" of the drab employment picture for the last year and a half. That sector added 7,000 jobs in June, compared with 50,000 in May.

"There was softness throughout this report no matter how you sliced it or diced it," said Prakken. "But it's not a recession-like decline."

A recession would provide declines on the order of hundreds of thousands per month, he said. Prakken predicts the end of 2008 will be "a big challenge" and that sustained growth will not pick up until next year.

ADP, short for Automatic Data Processing, processes payroll information for many large U.S. companies. Its report does not include government jobs and is seen by some as a harbinger for the Labor Department report, which will be issued on Thursday.

Recent government statistics have shown unemployment on the rise. Consumer spending has remained stronger than expected due, in part, to tax-rebate checks that started arriving in May, but confidence levels are at lows not seen since the 1980s. At that point, inflation and unemployment were in the double-digits.

And while gross domestic product has not declined, it has certainly weakened.

Nigel Gault, chief U.S. economist for Global Insight, says he is waiting for the government jobs report on Thursday to get a better sense of the employment picture, since the ADP report has overestimated private employment in recent months. However, the data certainly cast a negative impression.

"Areas which have been doing badly are still doing badly and the areas that weren't doing so badly are starting to weaken," he said, adding that the weak dollar and booming export sector have kept the manufacturing from entering a "headlong recession."

"We're somewhere in between at the moment, really," he said.

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