* ADP points to weak payrolls report
* New orders lift service sector
* Factory orders beat expectations
* U.S. stocks higher in volatile session
By Edward Krudy
NEW YORK, Dec 5 U.S. private-sector hiring took
a hit in November due to the impact of storm Sandy on the
northeastern United States but the country's huge services
sector continued to expand.
The ADP National Employment Report, which is closely watched
as it comes two days ahead of the government's monthly national
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 underpinned 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.
Wednesday's raft of data, which also included
better-than-expected factory orders and productivity, presented
a mixed picture of the U.S. economy. That was in part a
reflection of cross-currents from Sandy, as well as difficult
budget negotiations in Washington aimed at averting the "fiscal
cliff," a series of automatic spending cuts and tax hikes next
A report on the U.S. services sector showed a similar
slowing 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. The reading
topped economists' forecasts for growth to 53.5, according to a
Reuters survey. In the report, 50 marks the divide between
growth and contraction.
"The much larger service side of the U.S. economy remains
relatively healthy," said Joseph Trevisani, chief market
strategist at Worldwide Markets in 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."
In a twist to the story of Sandy's economic impact, some
companies reported that relief efforts actually boosted
business, if only temporarily, and this may have helped the
headline number beat expectations.
Respondents in the ISM survey did, however, suggest that
decisions such as hiring are being put on hold due to the
uncertainty that the fiscal cliff is generating.
A separate report on Monday showed that the manufacturing
sector contracted after two months of growth.
The noisy readings on the economy will make it harder for
the Federal Reserve to form a clear picture when it meets next
week. The U.S. central bank is widely tipped to announce a fresh
round of Treasury bond purchases, avoiding monetary policy
tightening to maintain support for the lackluster economy.
U.S. stocks were little changed after the data but rose in
volatile trade by midday. The S&P 500 index, a broad
measure of U.S. stocks, traded up 0.5 percent.
Also on Wednesday, a report showed new orders received by
U.S. factories unexpectedly rose 0.8 percent in October as
demand for motor vehicles and a range of other goods offset a
slump in defense and civilian aircraft orders.
The Commerce Department also upwardly revised October's
figures on non-defense capital goods orders excluding aircraft
in a hopeful sign that the slowdown in business investment in
recent months might soon draw to a close.
Economists at Barclays said the strong reading, driven by
orders and shipments of capital goods, equipment used to make
other things, means the economy will grow faster than expected
in the fourth quarter. They raised their gross domestic product
growth outlook for the quarter to 2.2 percent from 2 percent.
The report chimed with another release 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.
With the effects of Sandy out of the way in the months
ahead, hiring is expected to return to its previous trend even
if more slowly than most would like to see with the employment
rate still hovering near 8 percent.
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, were having a significant impact on 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 impasse over the fiscal cliff, which could slam the
economy to the tune of $600 billion next year, has been blamed
for fueling uncertainty and making corporate managers delay