Surprise rise in US private sector jobs

By Chris Bryant in Washington

Private sector employers unexpectedly added to the US workforce last month, providing a degree of reassurance to economists who fear an economic downturn could trigger a sharp rise in unemployment.

However, the initial boost to investor sentiment was offset by a bigger-than-expected drop in factory orders, underscoring weakness in the US manufacturing sector.

Nonfarm private employment increased by 8,000 in March - a far stronger result than the decline of 45,000 jobs forecast by economists. The previous month’s figures were also revised higher, from a loss of 23,000 jobs to a decline of 18,000.

The uptick in private employment helped assuage some of investors’ worst fears about the employment market ahead of Friday’s closely-watched jobs report.

However, Ian Shepherdson, chief US economist at High Frequency Economics, said little weight could be put on one number: “It does not necessarily mean there was a real improvement in the state of the labour market in March because the data are very noisy from month-to-month.”

Economists at Lehman Brothers also advised caution, because ADP payroll growth has tended to outpace official private employment growth.

Although some economists revised their estimates for nonfarm payrolls following the ADP report, Friday’s employment report is still expected to show show a third consecutive month of jobs losses.

Small private businesses, with less than 50 employees, appear to be holding up better than their larger competitors, adding 55,000 jobs last month compared to a decline of 52,000 jobs at companies with more than 500 workers.

On a sector basis, private sector service-providing industries added 85,000 jobs, but this was largely offset by a loss of 77,000 positions in the goods-producing sector. Manufacturing was also particularly weak, showing a decline of 58,000 jobs last month.

Underscoring the problems facing US manufacturers, the US commerce department said new orders at US factories declined for a second consecutive month, falling 1.3 per cent in February, much more than a 0.8 per cent drop forecast by economists.

Factory orders in January declined a revised 2.3 per cent, a slight improvement on the 2.5 per cent fall originally stated.