* Private sector added 119,000 jobs in April
* Job creation falls well below expectations
* Factory orders fell 1.5 percent in March
* Mortgage purchase applications rose last week
By Leah Schnurr
NEW YORK, May 2 U.S. companies hired the fewest
people in seven months in April, a worrisome sign for a labor
market that has struggled to gain traction and adding to
concerns that the economy has lost some momentum.
The ADP National Employment Report on Wednesday showed the
private sector added 119,000 jobs last month, below economists'
expectations for a gain of 177,000 jobs. The March figure was
also revised lower.
The report comes two days before the government's broader
and much-watched monthly jobs report.
"This is an upsetting report," said David Carter, chief
investment officer at Lenox Advisors in New York.
"The strength of the U.S. economic rebound is clearly still
uncertain. Hopefully we don't get a third consecutive summer of
Recent data, including softer labor market figures, have
fueled fears that the economy may have lost some strength as the
second quarter got under way. Those worries were partly offset
by data from an industry group on Tuesday that showed a
better-than-expected pick-up in the manufacturing sector last
But government data on Wednesday showed new orders for
factory goods suffered their biggest decline in three years in
March as demand for transportation equipment and a range of
other goods dried up.
Growth in the U.S. economy has been seen as increasingly
important to offset slack elsewhere in the world. The euro zone
on Wednesday reported another contraction in its factory sector.
In China, factory activity contracted again in April,
although at a slower rate, hinting at stabilization in the
world's second-largest economy.
The day's data helped take U.S. stocks down about 0.5
percent in midday trading, while Treasuries prices rose and the
euro fell against the dollar.
WARM WINTER WEATHER
But despite the weak numbers in the ADP report on
private-sector hiring, some analysts and economists were
cautious on whether the data indicates a trend in the labor
Joel Prakken at Macroeconomic Advisers LLC, which jointly
develops the employment report with payrolls processor ADP, said
the unusually warm winter months were partly to blame for the
weakness in ADP report as employers had moved their hiring up to
earlier in the year.
The evidence suggests private-sector employment was boosted
by as much as 70,000 in the winter months, Prakken said.
"It does play into this notion that the numbers over the
winter ... probably weren't quite as strong as the reports
indicated, and this number today probably is not as soft as it
appears on the surface," Prakken said on a conference call with
The manufacturing sector shed 5,000 jobs, the first loss
since September of last year, the report showed. That was in
contrast to data on Tuesday that showed a gauge of employment in
the sector rose to its highest level since last June.
The U.S. Labor Department's report on Friday on nonfarm
payrolls is expected to show hiring rebounded last month with
170,000 new jobs, an improvement from a meager 120,000 in March.
Private payrolls are seen rising by 175,000.
Jonathan Basile, director of economics at Credit Suisse,
said Wednesday's release did not change his forecast for a gain
of 150,000 in Friday's jobs data, noting ADP has had a mixed
record as an indicator of the payrolls numbers.
"For what it's worth, the first print of ADP ... has had
some big misses in recent months in either direction compared to
the first print of private payrolls. For instance, ADP overshot
by 88,000 in March, undershot by 87,000 in January and overshot
by 113,000 in December," Basile said in a note.
Boris Schlossberg, director of FX research at broker firm
GFT, said he was watching more closely for the employment
reading in the U.S. Institute for Supply Management's survey of
the services sector, due out on Thursday, which he said was a
better forecaster for the payrolls report.
In other data on Wednesday, the Commerce Department said
orders for manufactured goods dropped 1.5 percent after a
revised 1.1 percent rise in February.
On the housing front, applications for U.S. home mortgage
purchases rose for a second week in a row, though demand for
refinancing slipped as interest rates edged up, an industry
Markets have been speculating whether the Federal Reserve
will embark on a third round of bond buying, or quantitative
easing, to drive down long-term interest rates and help bolster
the economy. Fed Chairman Ben Bernanke last month said monetary
policy was appropriate, though he said the U.S. central bank
would not hesitate to launch another round of asset purchases if
the economy were to weaken.
Comments from several top Fed officials on Tuesday
reinforced the picture that the central bank is happy to stand
pat for now. The Fed has held interest rates at near-zero since
late 2008 and has purchased more than $2 trillion in long-term
Still, the Fed's concern about the high unemployment rate
means investors will be watching the jobs number on Friday for
clues on whether more bond buying - known as QE III - is in the
"Any disappointment over Friday's non-farm payrolls will
take us one step closer to QE III this summer, with the
likelihood already at over 50 percent that Bernanke pulls the
trigger by U.S. Labor Day," in early September, Michael
Woolfolk, senior forex strategist with BNY Mellon, wrote in a