NEW YORK (Reuters) - Mounting job losses and plans to lay off more workers continued to weigh on the U.S. economy in March, according to private reports that have analysts and investors bracing for more grim U.S. government labor market data from the government on Friday.
While other reports showed the contraction in U.S. factory activity slowed in March, and U.S. construction spending fell at a slower-than-expected rate in February, they were not enough to take focus away from what to many is the main data point of the week, U.S. non-farm payrolls for March on Friday.
U.S. private sector job losses accelerated in March to 742,000, more than economists’ expectations, according to a report by ADP Employer Services on Wednesday. February’s number was revised up to 706,000 job losses from a previously reported 697,000.
But the U.S. Labor Department’s non-farm payrolls report, due on Friday, accounts for public sector jobs as well as private and analysts are now fearful that current forecasts of 650,000 jobs lost in March, the median of economists’ forecasts in an earlier Reuters poll, will be too low.
“It is almost a loss of three quarters of a million jobs which is possibly the highest we have seen so far over the length of this crisis,” said Matt Esteve, a foreign exchange trader at Tempus Consulting in Washington of the ADP report. “Obviously foreboding ahead of (Friday’s) non-farm payrolls report.”
High Frequency Economics raised their estimate for the decline in Friday’s payroll to 750,000 job losses from 700,000.
A slew of recent data had led many economists to suggest the worst of the current 15-month, housing-led recession is over -- but that has been scant comfort to the jobless.
Separate data showed planned layoffs at U.S. firms fell in March to their lowest in six months, but quarterly job losses are at the highest in more than seven years as the U.S. recession continues to take a toll on employment.
Scheduled job losses fell 19.3 percent in March to 150,411, the lowest since October, but the more than 578,000 cuts so far in 2009 are the most for any quarter since the last one of 2001, outplacement company Challenger, Gray & Christmas said in a monthly report.
The news on the labor market, amid the overall economic slump which is likely to become the longest since the Great Depression of the 1930s, helped cap U.S. stock gains on Wednesday.
U.S. government bond prices, which generally benefit from signs of economic weakness, pared losses in the immediate wake of the ADP release but were lower later in the New York session.
ISM CONTRACTION SLOWS
Investors at least received some short term encouragement in a report showing U.S. factory activity shrank at a slower pace in March than in the previous month, according to data from the The Institute for Supply Management released on Wednesday.
With the current reading of 36.3, the index has been below 50, indicating contraction, for 14 straight months, though new orders rose to 41.2 in March from 33.1 in the prior month.
“The March ISM manufacturing report was mildly encouraging because new orders look relatively strong,” said Pierre Ellis, senior economist, Decision Economics in New York. “We’re only 9 points away from a reading of 50 and a reading of 50 reflects stability.”
In another sign of the poor labor market though, the employment component of the factory report was posted at 28.1, indicating ongoing job losses.
In other economic releases, U.S. construction spending fell at a slower-than-expected rate in February, government data showed on Wednesday, suggesting that the pace of deterioration was beginning to moderate.
The Commerce Department said spending on construction projects slipped 0.9 percent to a seasonally adjusted annual rate of $967.5 billion, the lowest since March 2004, after falling by a revised 3.5 percent in January.
Pending sales of existing U.S. homes rose modestly in February but the market is still weak in the face of continued declines in home values and a recession, the National Association of Realtors said on Wednesday.
The realty trade group’s Pending Home Sales Index, based on contracts signed in February, was up 2.1 percent to 82.1 from an index of 80.4 in January.
“Pending home sales have a way to go for there to be a meaningful increase,” said NAR chief economist Lawrence Yun.
Yun said “it will take a few months” for affordability to work through the market and burn off excess housing stock.
Additional reporting by Rodrigo Campos, Richard Leong, Ellen Freilich, Lucia Mutikani and Patrick Rucker
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