NEW YORK (Reuters) - U.S. private sector job losses accelerated in February, according to a report by ADP Employer Services on Wednesday that came in worse than economists’ expectations.
KEY POINTS: * ADP said private employers cut 697,000 jobs in February versus a revised 614,000 jobs lost in January. * The January job cuts were originally reported at 522,000. * Economists had expected 610,000 private-sector job cuts in February, according to the median of 23 forecasts in a Reuters poll, which ranged widely from a drop of 730,000 to losses of 500,000.
IAN SHEPHERDSON, CHIEF U.S. ECONOMIST, HIGH FREQUENCY ECONOMICS, VALHALLA, NEW YORK:
“The nightmare continues, but no one can be very surprised by this. The job losses are spread across all sectors and all sizes of employers, though the deterioration in recent months has been slightly more dramatic in small and medium-sized firms. Every indicator we know tells us that employment is tanking right across the economy, and we doubt any of the numbers have hit bottom yet. Plugging the ADP numbers into our payroll model generates a 700K drop. ADP is the least-bad single advance indicator of payrolls but it is far from perfect, so a range of -550K to -850K is a reasonable expectation for Friday’s number.”
GARY THAYER, SENIOR ECONOMIST, WACHOVIA SECURITIES, ST. LOUIS, MISSOURI:
“The ADP payrolls report provided another disappointing number. The private sector continues to shed jobs and job losses are widespread. The labor market continues to deteriorate as companies cut costs and restrain production.
“As for the market reaction, we’re getting used to the bigger job loss numbers. The report was disappointing, but not a real surprise so we’re not getting the flight to quality bid in bonds and stocks are holding in fairly well.
“There’s potential for a stock bounce. We’re very oversold. But we need to see a change in sentiment to where investors start to look forward, rather than at current data. There’s still a lot of uncertainty out there which is keeping people focused on the current data rather than future prospects.”
ANDRE BAKHOS, PRESIDENT, PRINCETON FINANCIAL GROUP, PRINCETON, NEW JERSEY:
“Its just a continuing pull back in the economy as businesses are cutting cost and we will probably continue to see this until there is a greater confidence in the stimulus package and in the Tarp and in what the administration and the Fed are doing in effort to stave off further economic erosion.
“There is a high level of skepticism with regards to the steps the administration is taking to address the economic problem, so Wall Street has been on pins and needles and is looking for a reason to buy and today’s number doesn’t necessarily add any great hope.”
JOHN SILVIA, CHIEF ECONOMIST, WACHOVIA SECURITIES, CHARLOTTE, NORTH CAROLINA:
“When I look at this overall, we lost a lot of jobs and we are going to lose a lot more jobs. We could lose two million jobs this year. I suspect, except for the federal government, it’s only education and healthcare industries that are adding jobs. Another thing is that once people lose their jobs, they are not going to find another job quickly.”
MATT ESTEVE, FOREIGN-EXCHANGE TRADER, TEMPUS CONSULTING, WASHINGTON:
“The number is awful and obviously that doesn’t bode well for the market ahead of Friday’s nonfarm payrolls number. The reason you’re seeing the U.S. dollar gain versus the euro here is risk aversion. While stocks look like they’re still going to open on a positive note, the correlation between the equity market and currencies has eased as of late. So any type of risk event such as awful employment numbers obviously is going to benefit the dollar in its status as a safe-haven investment.”
DAN FARETTA, SENIOR MARKET STRATEGIST, LIND-WALDOCK, CHICAGO:
“I was actually expecting it to be a little worse. Every month we’ve had data come in worse than expected. Until we get positive news about housing or industry or anything like that, the numbers will continue to get worse. The numbers keep weighing on all the markets.
“It’s confirming the market is as bad as we’re seeing it.”
KEVIN FLANAGAN, FIXED INCOME STRATEGIST FOR GLOBAL WEALTH MANAGEMENT, MORGAN STANLEY, PURCHASE, NEW YORK:
“I don’t know if Treasuries are reacting to the ADP numbers or not. I continue to hear about supply (weighing on Treasuries prices) and you are seeing stock markets overseas do better, while S&P futures are up.”
“For the Treasury market to improve we need to see a flight-to-quality play from equities or evidence that the recession is getting even worse than envisioned.”
MARKET REACTION: STOCKS: U.S. equity futures indexes pare gains. BONDS: U.S. Treasury debt prices extend losses. DOLLAR: U.S. dollar edges up versus euro.