* ADP points to weak payrolls report
* New orders lifts service sector
* U.S. stocks drift lower
By Edward Krudy
NEW YORK, Dec 5 U.S. private-sector hiring took
a hit in November due to the impact of storm Sandy that ravaged
consumers and businesses in the northeastern United States, but
the huge services sector continued to expand albeit at a modest
The ADP National Employment Report, which is closely watched
as it comes two days ahead of the government's monthly
employment report, showed that the private sector added 118,000
jobs during the month, below expectations for a gain of 125,000.
The report largely confirmed economists' forecast for a weak
reading in the Labor Department payrolls report on Friday.
Economists expect the economy added 93,000 jobs in November,
down from 171,000 the month before, according to a Reuters poll.
"It's close to what the market was expecting. If Friday's
employment report from the U.S. Labor Department comes in
similar to this, that would be a good outcome," said Terry
Sheehan, economic analyst at Stone and McCarthy Research
Associates in Princeton, New Jersey.
A separate report on the U.S. services sector showed a
similar dip in hiring during the month. But forward-looking
indicators pointed to faster growth as a rise in new orders and
business activity helped offset a slowdown in employment and
The Institute for Supply Management said its services index
rose to 54.7 last month from 54.2 the month before, with 50
being the divide between growth and contraction. The reading
topped economists' forecasts for growth of 53.5, according to a
"The much larger service side of the U.S. economy remains
relatively healthy," said Joseph Trevisani, chief market
strategist at Worldwide Markets, Woodcliff Lake, New Jersey.
"It has so far avoided the contraction in manufacturing, but
worse is probably coming in the first quarter of next year as
the economy continues to slow."
A separate report on Monday showed that the manufacturing
sector contracted after two months of growth.
U.S. stocks were little changed after the data but drifted
lower by midmorning. The S&P 500 index, a broad measure
of U.S. stocks, traded down 0.4 percent at 1,401.74 points.
Also on Wednesday, a report showed new orders received by
U.S. factories unexpectedly rose in October as demand for motor
vehicles and a range of other goods offset a slump in defense
and civilian aircraft orders, a hopeful sign for the
That chimed with another report showing U.S. nonfarm
productivity increased at a much faster clip than initially
thought in the third quarter as businesses held the line on
hiring even as output surged, with unit labor costs falling at
their fastest pace in almost a year.
Mark Zandi, chief economist of Moody's Analytics, who helps
compile the ADP report, said underlying jobs growth was closer
to 150,000 in November after discounting the impact of the storm
as well as seasonal jobs brought forward at the start of the
"Abstracting from the storm, the job market turned in a good
performance during the month," he said. "Superstorm Sandy
wreaked havoc on the job market in November, slicing an
estimated 86,000 jobs from payrolls."
Zandi said he was seeing little indication that budget
negotiations in Washington aimed at averting the so-called
"fiscal cliff," a series of automatic tax hikes and spending
cuts due in 2013, were having a significant impact of hiring.
"I don't sense that businesses have pulled back on their
hiring or increased their layoffs as a result of the angst
surrounding the fiscal issues," said Zandi.
The current impasse over the fiscal cliff, which could
impact the economy to the tune of $600 billion next year, has
been blamed for fueling uncertainty and causing corporate
managers to delay business decisions.