Job losses and plans to lay off workers hammered the struggling US economy in the final month of 2008, according to private reports that foreshadow grim labour market data from the government on Friday. US private employers shed 693,000 jobs in December, up sharply from the revised 476,000 jobs lost in November and far more than economists estimated, a report by ADP Employer Services said on Wednesday.
-- Consumer loan late payments at 28-year high
Separate data also showed planned layoffs at US firms eased in December from the previous month's seven-year high but were up an astounding 275 percent annually as the year-old recession cut a huge swathe of destruction through job market. "It is absolutely terrible," said Dave Lutz, managing director, Stifel Nicolaus, Baltimore.
"I can't imagine this is going to bode very well for any kind of forecasting going into the nonfarm payroll and unemployment rate numbers that we're going to see on Friday." The ADP December US job losses were the highest since the ADP's survey launch in 2001. Economists expect Friday's payrolls report to show 500,000 jobs were cut in December, according to the median of their forecasts in a Reuters poll.
However, Joel Prakken, chairman of Macroeconomic Advisers, which jointly developed the ADP report, said its data was consistent with a loss of about 670,000 jobs in the government's more comprehensive non-farm payrolls report. Worse yet, he said he still expected a little more than 2 million US job losses over the next year.
He added that the US economy probably contracted at a 5.5 percent annualised rate in the fourth quarter and would shrink 3.5 percent in the first quarter of this year. "After that economic growth is going to depend on the size and timing of the fiscal package that is being discussed in Washington right now," Prakken said. The grim jobs data sent US stock index futures lower. Government bonds, which generally benefit from weak economic data, pared their losses.
The median of estimates from 20 economists surveyed by Reuters for the ADP Employer Services report was for 473,000 private-sector jobs lost in December. The report for December was the first month the data was issued using a new methodology, which ADP said was designed to more closely predict the outcome of the government's non-farm payrolls report.
The economic slump, which is likely to be the longest since the Great Depression of the 1930s, also produced the worst year of layoffs since 2003, outplacement company Challenger, Gray & Christmas said in its monthly report on US job cuts. The Challenger report said heavy job-cutting could continue through at least the first half of 2009, and the outlook afterward hinges on President-elect Barack Obama's plans to stimulate the economy through increased government spending.
Job cuts announced in December totalled 166,348, down 8.4 percent from November's 181,671, Challenger, Gray & Christmas said. Despite the monthly decline, layoffs were up from just 44,416 in the year-ago period.
Overall, employers announced 1,223,993 job cuts in 2008, the largest annual total since 2003, when there were 1,236,426 job cuts. The job losses, on top of the worst credit crunch in a generation, do not bode well for consumers, who struggled throughout 2008. The American Bankers Association said late payments on US consumer loans rose in the third quarter to their highest level since 1980, with late payments on indirect auto loans and home equity lines of credit hitting the highest ever during that period. The ABA said it expected delinquencies on all types of US consumer loans to rise in coming quarters.