Private sector adds jobs, slow growth seen
NEW YORK (Reuters) - Private employers added more jobs than expected last month, though the lack of robust labor market growth reinforced the Federal Reserve's view that economic progress will likely be "frustratingly slow."
While the central bank nodded to stronger economic growth in the third quarter, the Fed also cut its forecast for growth and raised its predictions for unemployment.
The gloomier unemployment view came ahead of Friday's key nonfarm payrolls report and after data on Wednesday showed the private sector added 110,000 jobs in October.
The ADP National Employment Report topped economists' expectations for a gain of 101,000 jobs. ADP also increased September's job additions to a gain of 116,000 from the previously reported 91,000.
"You're more or less treading water here, just enough to keep the unemployment rate steady," Scott Brown, chief economist at Raymond James in St. Petersburg, Florida, said of recent jobs data.
"We would really like to see stronger growth to get the unemployment rate down substantially, but the Fed is not expecting that to happen any time soon."
In its updated quarterly projections, the Fed said it expects the economy will expand by a tepid 2.5 percent to 2.9 percent next year, down from the 3.3 percent to 3.7 percent it had expected in June.
Officials saw the unemployment rate going no lower than 8.5 percent to 8.7 percent by the end of 2012, up from the 7.8 percent to 8.2 percent range seen in June.
Fears the U.S. economy could be heading for another recession have ebbed in recent months as growth accelerated in the third quarter after a weak first-half performance.
Stubbornly high unemployment remains a major challenge, however, for a recovery that is fragile.
Wall Street took comfort from the Fed's pledge that it is prepared to do more for the economy if conditions warrant, sending U.S. stocks up more than 1 percent.
The ADP report showed private sector job gains came from small and medium-size businesses last month, which added 58,000 and 53,000 jobs, respectively. Large businesses shed 1,000 positions. The report is jointly developed with Macroeconomic Advisers LLC.
"It portrays a job market that's improved a bit since earlier in the summer. But we're still not generating the kind of job growth that's going to be enough to bring down the unemployment rate quickly," said David Resler, chief economist at Nomura Securities in New York.
Analysts said the ADP figures would not likely prompt major readjustments to forecasts for Friday's more comprehensive nonfarm payrolls report.
That release is expected to show a rise in overall nonfarm payrolls of 95,000 last month, based on a Reuters poll of analysts, and a rise in private payrolls of 120,000. The unemployment rate is seen holding steady at 9.1 percent.
Earlier on Wednesday a separate report showed the number of planned layoffs at U.S. firms dropped in October after hitting a more than 2-year high the month before, while seasonal positions pushed hiring plans sharply higher.
Employers announced 42,759 planned job cuts last month, tumbling 63.1 percent from 115,730 the month before, according to the report from consultants Challenger, Gray & Christmas, Inc. It was the lowest level in four months.
Hiring plans surged to 159,177 jobs last month from 76,551 in September as companies announced seasonal positions. Retail jobs led the way with 133,940 openings.
In housing data, applications for U.S. home mortgages were little changed last week as purchase demand improved but refinancing activity stagnated, an industry group said.
The Mortgage Bankers Association's seasonally adjusted gauge of loan requests for home purchases rose 1.8 percent, while the index of refinancing applications was off 0.2 percent. The overall index of mortgage application activity edged up 0.2 percent.
(Editing by Chizu Nomiyama)