More progress on the U.S. employment front, as the private sector cut just 22,000 jobs in January, according to data compiled in the ADP National Employment Report. That follows a revised loss of just 61,000 jobs in December, down from the previously released 84,000.
What's more, January's drop was the smallest decline in private employment since payrolls started falling in February 2008, or two months after the recession started. A Bloomberg News economists survey had expected private employers to cut 30,000 jobs in January.Separately, private placement firm Challenger, Gray & Christmas said planned layoff announcements by U.S. employers increased 59% to 71,482 in January -- a five-month high and up from 45,094 in December, CNNMoney.com reported Wednesday. Worrisome as it is, at least that's still a substantial decline from the 241,749 cuts announced in January 2009.
Midsize Companies Added Jobs
ADP reported that the job loss totals in January by business size were: 19,000 among large companies, and 12,000 among small ones. However, employment increased 9,000 in midsize businesses.
Further, the services sector continued to rebound in January, adding 38,000 jobs. However, that was not large enough to offset continued losses in the goods-producing sector, which shed 60,000 jobs. Manufacturing lost 25,000 positions in that category. The construction sector lost 37,000 jobs, its 36th consecutive monthly decline, and brought total construction jobs lost since the January 2007 peak to 1.804 million. Financial services eliminated 16,000 positions.
Investors should monitor monthly job reports because job creation is positively correlated with corporate revenue and earning gains. And as corporate earnings go, so goes the U.S. stock market.
Job creation also is the key to consumption, the spending that helps drive U.S. GDP. However, given a decade of overconsumption and stagnant incomes in many job classifications, few economists expect consumption patterns to return to the home equity/refinance-distorted, cash-flush years of the housing bubble. Nevertheless, many economists do expect both consumer spending and business investment to trend slightly higher in the quarters ahead.
The Trend Is Key
Overall, ADP's January private sector jobs report is encouraging for two reasons. First, the decline in layoffs continues: The trend remains toward eventual, net monthly job gains in the private sector.
Second, and equally significant, midsize business added positions in January -- the first increase in that category in two years. To be sure, the 9,000-job increase was modest, but again, the trend is the key. It appears that cuts at smaller firms have bottomed, and some are starting to hire, a welcome sight.
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