8:59am

Wed January 5, 2011
Economy

Survey: December Private Job Growth Triples Forecast

Payroll processor ADP reported Wednesday that private employers added 297,000 jobs last month -- nearly triple the rise economists expected. That could be a good sign for the Labor Department's monthly jobs report due out Friday, but some economists were cautious, saying seasonal factors may skew the data.

Forecasters had predicted a 100,000-job increase for December. ADP said hiring was strong across the board at both large and small companies, and for the first time in over three years, the construction industry stopped shedding jobs.

Service-related jobs rose by 270,000 in December, the eleventh month in a row, the company said. Goods-producing jobs rose 23,000, the second consecutive monthly gain, it said.

Construction employment was unchanged last month, ending a string of declines totaling 2.3 million jobs since June 2007, ADP said. But it said financial services firms cut 8,000 jobs in December.

Economists forecast that the entire economy -- including government workers not counted in the ADP survey -- added 140,000 jobs in December.

If job growth is as strong as this report suggests, that could mean the nation's 9.8 percent unemployment rate may finally start going down.

Doubts About Job Growth

But some economists are being cautious about the unemployment outlook.

"I don't think it's actually going to have that much of an impact on the unemployment rate," says Mark Vitner, senior economist for Wells Fargo. "What it may indicate is that the disappointing unemployment number we got for November was a bit of a fluke."

In November, the unemployment rate rose to 9.8 percent with nonfarm payrolls rising just 39,000 -- numbers that raised concerns that the recovery was faltering.

Vitner says the huge spike in ADP's report was a result of seasonal hiring that took place too late to be captured in the November employment report.

He says the spike "will also likely show up to some degree" on Friday when Labor Department releases its report. But Vitner notes: "We're not expecting the nonfarm employment numbers to rise by the same magnitude as the ADP report."

Wells Fargo is forecasting a reduction in the unemployment rate by one-tenth of a percent to 9.7 percent.

Service Sector Index Climbs

A separate report Wednesday said strong consumer demand pushed a key measure of the economy's service sector to its highest level in more than four years.

The Institute for Supply Management, a trade group of purchasing executives, says its index of service sector activity rose to 57.1 in December, up from 55 the previous month. Any reading above 50 indicates growth. The increase marks the 12th straight month of expansion for the sector, which employs 80 percent of the workforce. It includes industries from health care to retail to financial services.

The index is at its highest point since May 2006.

A day earlier, the group said manufacturers produced more goods and booked more orders in December, leading to the fastest growth in factory activity since May.

The Institute for Supply Management said its index of manufacturing activity rose to 57 in December from 56.6 in the previous month. Any reading over 50 indicates growth.

NPR's Brett Neely, Joshua Brockman and the Associated Press contributed to this report. Copyright 2011 National Public Radio. To see more, visit http://www.npr.org/.