From the Financial Times:
US job losses reach 697,000 in February
By Alan Rappeport in New York and Alan Beattie in Washington
Published: March 4 2009 13:59 | Last updated: March 4 2009 19:07
The US private sector shed 697,000 jobs in February, according to a closely watched survey of business employment published on Wednesday.
Separately, the services sector shrank less than expected last month but more sharply than in January. The Institute of Supply Management’s non-manufacturing index fell to 41.6 from 42.9 the month before. Readings below 50 signal contraction.
The grim data were compounded by the release of a pessimistic assessment of the US economy by the Federal Reserve, which showed a weakening labour market, consumer demand, manufacturing output and commercial real estate almost across the board.
The so-called ”Beige Book”, which collates reports from the Fed’s twelve districts, said that national economic conditions deteriorated during late January and early February and were not expected to pick up until the end of the year or into 2010. Ten of the twelve regional reports indicated weaker conditions or declines in economic activity, while Philadelphia and Chicago said that their economies ”remained weak”, the study said.
The report suggested that rising unemployment was beginning to feed through into slowing or falling wages, which have remained relatively strong so far in the recession. ”With rising layoffs and hiring freezes, unemployment has risen in all areas, reducing or eliminating upward wage pressures,” the Beige Book said.
The monthly ADP Employer Services survey, which tracks private non-farm payroll employment, showed further deterioration in the labour market. The result was worse than economists expected and followed ADP’s dire January report estimating a revised 614,000 jobs lost.
ADP changed the methodology of its survey in December after it significantly undershot the US government’s labour report. Last month’s result also undershot the official figures, which showed that 598,000 jobs were lost in January compared with ADP’s original estimate of 522,000.
“The nightmare continues,” said Ian Sheperdson, chief US economist at High Frequency Economics. “Every indicator we know tells us that employment is tanking right across the economy.”
The services sector was hit the hardest last month, shedding 359,000 workers. Meanwhile the goods-producing sector lost 338,000 jobs, the 25th consecutive monthly drop, and manufacturing lost 219,000 jobs, marking three years of consecutive monthly declines. The construction sector lost 114,000 jobs in February and has shed more than 1m workers since January 2007.
Construction work has contracted severely during the last two years, as the housing market has collapsed. On Monday government figures showed that construction spending fell by 3.3 per cent in January, more than double what analysts had predicted. After downward revisions, the quarterly decline was the worst on record.
Mid-sized and small businesses suffered the most job cuts last month, shedding 314,000 and 262,000 workers respectively. Large companies – those with more than 500 employees – cut 121,000 jobs.
“Sharply falling employment at medium and small-size businesses clearly indicates that the recession is spreading aggressively beyond manufacturing and housing-related activities,” according to the ADP report.
In a separate report on Wednesday, Challenger, Gray and Christmas, a consultancy, found that companies announced 186,350 job cuts in February, down 23 per cent fom January’s seven-year high. However, the February total was 158 per cent higher than in the same month the prior year.
Economists expect the official non-farm payrolls report due on Friday to show that 650,000 jobs were lost in February, bringing the unemployment rate to 7.9 per cent. Pessimistic forecasters project that as many as 850,000 jobs may have been lost last month.
According to ISM employment activity contracted in February for the 13th time in the last 14 months, with 14 out of 18 industries showing declining employment. The contraction was less severe than in January and jobs grew in the real estate, rental and leasing industry and in the utilities sector, while retail, construction and education services shed jobs.
The ISM’s measure of business activity showed contraction accelerating in February. The only industries showing improved performance were agriculture, the arts and healthcare. Wholesale trade, management and real estate performed worse last month.
Inventory levels slimmed in February, as companies cleared their stocks. But inventory sentiment rose, a sign that businesses feel that their backlogs remain too high.
The overall reading of 41.6 was slightly better than the 41 economists were expecting and from November’s record low of 37.4.
“The rate of deterioration in economic conditions has moderated a little from the virtual free-fall that existed late last year,” said Josh Shapiro, chief US economist at MFR. “While a step in the right direction, this hardly is indication of impending recovery.”