March 31, 2010 / 12:25 PM / 7 years ago

Private sector cuts jobs in March

<p>People wait in line to enter the NYCHires Job Fair in New York in New York, February 24, 2010. REUTERS/Shannon Stapleton</p>

NEW YORK (Reuters) - Private employers unexpectedly shed jobs in March, dampening hopes about the strength of the recovery two days before the more closely watched government payrolls report.

In addition, U.S. Midwest business activity expanded less than expected in March while a gauge of New York City business conditions fell, separate reports showed on Wednesday.

U.S. private employers cut 23,000 jobs in March, missing expectations for an increase in jobs, but the decline was slightly less than the losses in February, according to the data by a payroll processing company.

“It throws a little cold water on the idea we were going to be adding jobs in March, which is a little disappointing. People thought finally this might be the month,” said John Canally, investment strategist and economist for LPL Financial in Boston.

A forecast of 20 most-accurate economists polled by Reuters calls for job gains of 200,000 in Friday’s report.

Job creation is considered key to keeping the economic recovery alive. A March payrolls rise would mark just the second time jobs have increased since December 2007, when the recession started.

The median of estimates from 35 economists surveyed by Reuters for the ADP Employer Services report, jointly developed with Macroeconomic Advisers LLC, was for a rise of 40,000 private-sector jobs this month.

U.S. stocks were down following the ADP data and quarter-end profit-taking, while the dollar slipped against the euro and U.S. government debt prices rose.

Markets will be closed for the Good Friday holiday when the non-farm payrolls report comes out.

The unexpected drop in private employment did not convince economists to change their forecasts for March payrolls.

“The ADP report nonetheless highlights how heavily the labor market is leaning on the government for support. Gains in employment will come, but slowly and with difficulty this year,” said Ryan Sweet, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania.

The Institute for Supply Management-Chicago business barometer slipped to 58.8 in March from 62.6 in February. Economists forecast the index at 61. A reading above 50 indicates expansion in the regional economy.

Meanwhile, the ISM-New York’s seasonally adjusted index of current business conditions fell to 60.6 in March from a revised 78.1 in February. The 50 level separates growth from contraction.

On Thursday, ISM data is expected to show the U.S. manufacturing sector expanded in March for an eighth straight month, while ISM’s report on Monday is forecast to show the vast services sector likely also grew.

Although data continues to show the economy is steadily recovering, the Federal Reserve has reiterated its commitment to keep benchmark interest rate near zero.

Dennis Lockhart, president of the Atlanta Fed, said at a luncheon that the central bank won’t be tightening policy any time soon given the unemployment problem. The jobless rate is currently 9.7 percent.

Other data on Wednesday showed new orders received by U.S. factories rose for the sixth straight month in February. The number was slightly more than expected.

Also, U.S. mortgage applications rose in the latest week for the first time in three weeks as demand for home purchase loans reached the highest level since October.

Additional reporting by Leah Schnurr, Lucia Mutikani and Kristina Cooke; Editing by Kenneth Barry

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