Some bad omens for key jobs report
Ahead of Friday's government figures for December, new reports show huge payroll losses.
NEW YORK (CNNMoney.com) -- Some jarring reports Wednesday that show the labor market is still staggering are giving economists reason to fret about the government's monthly jobs report due at week's end.
The reports - one from payroll processor ADP showing 693,000 lost private-sector jobs in December, and another from outplacement firm Challenger, Gray & Christmas showing 166,348 announced job cuts last month - raise concern that the worst of the job losses in the current recession may not be over.
"The loss of jobs is beginning to create a bit of a negative feedback loop," said Mark Vitner, senior economist at Wachovia, indicating that the slowing economy causes employers to chop jobs, which in turn slows the economy further.
Friday's Labor Department report is expected to show a loss of 475,000 jobs in December, down from the 533,000 reported for November, according to a consensus estimate of economists complied by Briefing.com. The unemployment rate is forecasted to rise to 7% from 6.7%.
But Bernard Baumohl, chief global economist at The Economic Outlook Group, expects the number of jobs cut in December to approach three-quarters of a million.
"We expect the upcoming employment report will alarm investors and terrify households," he wrote in a research note. "Indeed, we would be somewhat relieved if payroll losses came close to November's 500,000 level."
ADP: The ADP National Employment Report, which is calculated based on payroll data, reported that the private sector shed 693,000 jobs on a seasonally adjusted basis in December. That was more than the 476,000 private-sector jobs lost in November, according to the payroll-processing company.
"This is a weak number, weaker than expected," said ADP spokesman Joel Prakken in a conference call with reporters. The drop in December was the largest monthly numerical drop since 2001, which is as far back as ADP has records.
"This is shockingly awful," said Ian Shepherdson, chief U.S. economist at High Frequency Economics, in a research note to clients.
Shepherdson said that the ADP report indicated that consensus estimates for Friday's job report could be low.
"If the recent relationship between the ADP numbers (after their recent revisions) and the official payroll data holds, then we should expect a number of about -700K (minus 700,000) on Friday, the biggest drop in 59 years," he wrote. "We await Friday with trepidation."
Smaller and medium-sized businesses were hit harder than big companies, according to the ADP report. Smaller businesses, those companies with fewer than 50 employees, lost 281,000 jobs in December. Medium-sized businesses, companies with between 50 and 499 employees, lost 321,000 employees. Larger businesses, with 500 or more employees, shed 91,000 jobs.
According to the report from ADP, the service sector lost 473,000 jobs and the manufacturing industry lost 120,000 jobs.
Challenger report: The number of announced job cuts in December fell 8.4% from a month earlier, but was nearly four times the total of the same month in 2007, according to a report released Wednesday from the outplacement firm Challenger, Gray and Christmas.
Challenger said the 166,348 announced job cuts were the most for the last month of the year since the company began compiling data in 1993.
December's job cut announcement total was down from the pace in November, when employers announced a 7-year high of 181,671 job cuts, according to Challenger. But the total was nearly four times the number in December 2007, when employers announced 44,416 job cuts.
In all of 2008, employers announced 1,223,993 job cuts, which was the largest number of job cuts announced in a year since 2003, when employers announced 1,236,426 job cuts, according to Challenger. The annual number represented a 59% jump from the prior year, when employers announced 768,264 job cuts.
The pace of job cuts accelerated in the second half of the year as the recession took hold of the nation. In the fourth quarter of 2008, employers announced 460,903 job cuts, which was the largest single quarter total since the first quarter of 2002, according to Challenger.
The financial sector announced more job cuts than any other industry in 2008, with plans to cut 260,110 workers, according to Challenger. The battered auto industry came in second for announced job cuts, with 127,281.
Meanwhile, a report issued by TrimTabs Investment Research estimated that the U.S. economy lost 683,000 jobs in December. That would be the biggest monthly job loss on record since 1970 - and TrimTabs said it doesn't expect the losses to slow.
"The economy could lose one to two million more jobs in the next several months because all the major indicators we track show the economy is deteriorating further," said Charles Biderman, CEO of TrimTabs, in a written statement.
Looking ahead: As analysts look forward, they don't expect the pace of job cuts to slow any time soon.
"It's inevitable you'll see several more months of very disappointing job numbers, and only later in the year would I expect these numbers to stabilize and start to improve," ADP's Prakken said.
"Unfortunately, heavy job-cutting could continue through at least the first half of 2009," said John A. Challenger, chief executive officer of Challenger. He also said that the proposed stimulus package could work to support the job market in the second half of the year.
"The plan to rebuild the nation's crumbling infrastructure will benefit not only laborers on the front lines, but it will push up through the economy, creating jobs for manufacturing workers, engineers, architects, technology specialists, etc.," said Challenger.
Wachovia's Vitner said he is looking for job losses to remain at elevated levels in the coming months, but for losses to decelerate in the middle of this year.
"All recessions come to an end, and at some point the blood letting will stop," he said, adding that when employers feel that the amount of goods and services does not meet demand, hiring will start again.
-- CNNMoney.com staff writer Jessica Dickler contributed to this report. 
