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Private hiring contracts for first time in seven months

U.S. private employers unexpectedly cut 39,000 jobs in September after an upwardly revised gain of 10,000 in August, a report by a payrolls processor showed Wednesday.
/ Source: news services

U.S. private employers unexpectedly cut 39,000 jobs in September after an upwardly revised gain of 10,000 in August, a report by a payrolls processor showed Wednesday.

September’s hiring contraction was the first in seven months. The August figure was originally reported as a loss of 10,000.

The median of estimates from 38 economists surveyed by Reuters for the ADP Employer Services report, jointly developed with Macroeconomic Advisers LLC, was for a rise of 24,000 private-sector jobs in September.

The ADP figures come ahead of the government's much more comprehensive labor market report on Friday, which includes both public and private sector employment.

That report is expected to show overall nonfarm payrolls were unchanged in September, based on a Reuters poll of analysts, but a rise in private payrolls of 75,000.

Economists often refer to the ADP report to fine-tune their expectations for the payrolls numbers, though it is not always accurate in predicting the outcome.

Private hiring has been slow to pick up as the economy remains sluggish. Uncertainty about costs from health care and financial regulatory reform as well as potential changes to taxes have been major reasons companies have shied away from adding new jobs.

Signs of expansion in hiring would be considered a strong signal that the economy is starting to improve. The Labor Department's weekly reports on unemployment claims have indicated that hiring still remains weak.

But weak jobs figures could also be enough to get the Federal Reserve to resume buying Treasurys in an effort to try and stimulate borrowing and spending. Japan's announcement Tuesday that it cut a key interest rate to near zero percent and will buy some of its government bonds is adding to expectations the U.S. Fed will take similar actions to buy bonds.

A separate report released Wednesday showed the number of planned layoffs at U.S. firms rose slightly in September, though it was the second lowest level of the year.

Employers announced 37,151 planned job cuts last month, up seven percent from the 34,768 job cuts reported in August, according to the report from global outplacement consultancy Challenger, Gray & Christmas, Inc.

"The low job-cut numbers we are seeing in almost every sector do not necessarily translate into increased hiring," John Challenger, chief executive officer of Challenger, Gray & Christmas, said in a statement.

"There is hiring going on in the economy, but it is not enough make a discernible dent in the number of unemployed," he said.

The September job-cut figure was down from a year ago, when the report found 66,404 planned layoffs.

Overall, employers announced 411,272 job cuts so far this year, which was 64 percent below the 1,136,908 layoffs announced by this point in 2009.

The government and non-profit sector, which announced 11,091 job cuts during the month, have continued to struggle. The pharmaceutical sector, which has announced 43,334 cuts this year, including 6,069 in September, was responsible for the next biggest overall job cuts.

"Government employers ... are typically big contributors to job creation, not only through their own hiring, but also by purchasing goods and services from the private sector," said Challenger. "Unfortunately, this massive part of the economic engine simply is not firing on all pistons."

"Employers in the private sector have the cash to spend on new equipment and employees, but are waiting for demand to increase enough to warrant the investment," he said.