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Public Sector to Add 55,000 Jobs

Washington Post via YellowBrix

June 03, 2010

Multiple indicators pointed to improvement in the job market, but recovery continues to come at a slow pace.

Private-sector jobs in the U.S. increased by 55,000 last month, according to a national employment report published by payroll giant Automatic Data Processing Inc. and consultancy Macroeconomic Advisers. Separately, the number of U.S. workers filing new claims for unemployment benefits fell last week by more than expected, but the latest figures show the job market still remains weak.

Economists had expected ADP to report a job gain of 75,000 in May. The estimated change in employment for April was revised from an increase of 32,000 to an increase of 65,000.

The Labor Department said in its weekly report Thursday that initial claims for jobless benefits fell by 10,000 to 453,000 the week ended May 29. Economists who were surveyed by Dow Jones Newswires had predicted claims would decrease by 5,000.

The previous week’s level was revised slightly upward, to 463,000 from 460,000.

Despite this latest drop, the four-week moving average — which aims to smooth volatility in the data — increased slightly for the week ended May 29. The four-week moving average rose by 1,750 to 459,000 from the previous week’s revised average of 457,250.Total claims lasting more than one week, meanwhile, also rose.

The ADP survey tallies only private-sector jobs, while the Bureau of Labor Statistics’ nonfarm payroll data, to be released Friday, include government workers.

The hiring of workers for the 2010 census is expected to cause a surge in hiring. Economists surveyed by Dow Jones Newswires expect the BLS will report May payrolls jumped by 515,000, following a gain of 290,000 in April. Among those economists forecasting private-sector jobs within the BLS data, the median projection is for a gain of 188,000.

The May unemployment rate is projected to slip to 9.7% from 9.9% in April.

The latest ADP report showed large businesses with 500 employees or more added only 3,000 employees and medium-size businesses hired 39,000 workers in May. Small businesses that employ fewer than 50 workers increased payrolls by 13,000.

Service-sector jobs added 78,000 last month, while factory jobs increased by 15,000.

ADP, of Roseland, N.J., says it processes payments of one in six U.S. workers, while Macroeconomic Advisers, based in St. Louis, is an economic-consulting firm.

Other job reports released Wednesday also showed improvement in the labor markets.

The placement firm Challenger, Gray & Christmas reported company layoff announcements rose 1.3% to 38,810 jobs in May, from the four-year low of 38,326 job cuts announced in April.

TrimTabs Investment Research said its data show the U.S. economy added 475,000 in May. TrimTabs bases its employment estimates on an analysis of daily income tax deposits to the U.S. Treasury from all salaried employees.

The latest jobless claims data includes some estimates due to the Memorial Day holiday, a Labor Department economist said Thursday. The Labor Department estimated figures for the Virgin Islands, Hawaii and Idaho. Virginia and Wyoming provided their own estimates. California, a state large enough to move the weekly claims figures, provided hard numbers for four days in the week and an estimate for Memorial Day.

In mid-May, claims unexpectedly spiked — a move that rattled the markets and left some economists a bit concerned about the lack of strong improvement in claims data even as the U.S. economy continues to grow again. In a sign there’s been little evidence of improvement in the job market, claims as of May 29 remain at similar levels registered in the final week of 2009, according to Labor Department data.

Economists are predicting a strong May jobs report due out this Friday with more than 500,000 new jobs added to the U.S. economy. Still, those numbers are likely to be inflated due to temporary hiring by the U.S. government for the 2010 Census, and overall unemployment isn’t expected to ease significantly.

In a report released earlier this week by the Labor Department, meanwhile, hundreds of metropolitan areas faced tougher job prospects in the month of April compared with one year ago. The unemployment rate was higher in 291 of the 372 metropolitan areas covered by the report.

In the Labor Department’s claims report Thursday, the number of continuing claims—those drawn by workers for more than one week in the week ended May 22—went up by 31,000 to 4,666,000 from the preceding week’s revised level of 4,635,000.

The unemployment rate for workers with unemployment insurance for the week ended May 22 was 3.6%, unchanged from the prior week’s unrevised rate.

The largest decrease in claims occurred in Michigan, which saw claims fall by 2,269. Other states with decreases included Tennessee, Pennsylvania, Georgia and California.

The largest increase in claims occurred in New York, which saw claims rise by 1,556 in the week ended May 22 due to layoffs in the construction, trade and service industries. Other states with increases included Missouri, Oklahoma, Oregon and Iowa. First-Quarter Productivity Revised Lower

Meanwhile, U.S. productivity rose less than previously thought in the first three months of 2010 as companies cut labor costs by a lower amount than originally estimated.

Nonfarm business labor productivity, or output per hours worked, rose by a seasonally-adjusted annualized rate of 2.8% in the first quarter compared to the final three months of 2009, the Labor Department said Thursday.

Economists polled by Dow Jones Newswires were expecting productivity to have risen by 3.2%. First-quarter productivity was originally estimated to have increased by 3.6% in the Labor Department’s first release May 6.

Unit labor costs — a key gauge of where prices are heading — decreased at a 1.3% annualized rate last quarter, versus previous estimates for a 1.6% decline. The decline was in line with economists’ forecasts.

The productivity gains should help keep prices in check, making the Federal Reserve comfortable with keeping short-term interest rates near zero to support the economy so that unemployment can come down. Companies continued to cut costs at the start of the year even as the economic recovery gained momentum, meaning they got more from existing work forces.

Productivity usually picks up sharply at the end of recessions and then eases off as businesses start hiring and increasing work hours to meet demand. Although the fall was lower than previously thought, the ongoing decline in unit labor costs shows that productivity continues to outstrip compensation.

Hourly compensation in the nonfarm business sector increased 1.5% last quarter. Real compensation, adjusted for inflation, was flat.

Nonfarm business output rose 4.0% during the first quarter, at an annualized rate. Hours worked rose 1.1%, the biggest increase since the second quarter of 2007.

Productivity in the manufacturing sector, which has been leading the economic recovery, rose 1.5% last quarter. Manufacturing output increased 7.2%. Hours worked in the manufacturing sector posted their biggest jump since the second quarter of 1996, gaining 5.6%.

Fourth-quarter 2009 productivity numbers were unrevised, showing a 6.3% increase. Unit labor costs for the final quarter of last year were revised to show a 7.8% decline, from the previous estimate of a 5.6% drop.

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