NEW YORK (CNNMoney.com) -- The jobs picture still looks sour, but there could be light at the end of the tunnel.
The bad news: The private sector slashed more jobs than expected in August, reversing a sixth-month trend of job gains. The good news: Overall employers announced fewer planned job cuts.
Private sector employers cut 10,000 jobs in August -- a drop from the downwardly revised 37,000 jobs they added the month before, according to a report by payroll processing firm Automatic Data Processing.
Those cuts were worse than predicted. Economists polled by Briefing.com had expected the report to show 13,000 jobs added in August.
While jobs statistics are often a volatile measure, the drop is still enough to "heighten fears about a double-dip recession," Paul Ashworth, senior U.S. economist with Capital Economics said in a note to investors.
After the report was released, stock futures dipped slightly, but then rebounded as stocks popped up at the opening bell.
Job losses in the goods producing sector dragged down the entire measure, while the services sector actually saw a boost in employment. Both the construction and financial services industries cut jobs in August, continuing a three-year downward trend in those sectors.
ADP looks backward at the month, compiling data from actual payrolls. But earlier on Wednesday morning, a separate report showed employers' plans for future job cuts sunk to a 10-year low during the month.
After rising for three months in a row, planned job cuts plummeted to 34,768 in August, the lowest level since June 2000 and down 17% from the previous month, according to outplacement firm Challenger, Gray & Christmas Inc.
Compared to a year ago, downsizing activity dropped 55% in August, and job cuts have eased 65% so far this year compared with the same period last year.
"Every other job market indicator seems to be stuck in first gear," said John Challenger, CEO of the firm. "In contrast, the layoff picture has improved so significantly that we are at pre-dot-com collapse levels when it comes to monthly job-cut announcements."
The separate jobs reports use different metrics, with ADP measuring only private sector job growth and Challenger compiling planned job cuts in the government and non-profit sectors as well as private industry.
"The two reports in combination give us a glimpse of exactly where we're at: companies have stopped firing, but are not yet hiring," said Adrian Cronje, chief investment officer of investment firm Balentine.
Private sector businesses are holding cash on their balance sheets, he said, but are not hiring due to an uncertain outlook about future tax rates and fiscal policy.
According to Challenger, the industrial goods sector announced the most job cuts in August, but looking year-over-year, job cuts in the sector were down significantly overall.
The Challenger report also showed the government and non-profit sector shed the most jobs this year, accounting for 30% of all 2010 job cuts and eliminating three times more jobs than the pharmaceutical sector, which reported the second highest number of year-to-date cuts.
ADP and Challenger's numbers set the stage for the government's closely watched jobs report due Friday. Economists are expecting the report to show there were 120,000 jobs lost in August, an improvement over July's 131,000 job loss.