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Mixed signals for the job market

By Charles Riley, staff reporter

NEW YORK (CNNMoney) -- Payroll processing firm ADP reported a larger-than-expected increase in private-sector employment Wednesday, but a separate report showed planned layoffs rose sharply in February.

ADP said private employers added 217,000 jobs in February, compared with an upwardly revised increase of 189,000 jobs in January. Economists surveyed by Briefing.com had expected a gain of 165,000 jobs in the month.

But outplacement consulting firm Challenger, Gray & Christmas said that employers announced plans to cut 50,702 jobs in February, up 32% over January. That's also 20% higher than the 42,090 planned layoffs announced in February 2010.

The ADP report bodes well for Friday's monthly payrolls report from the Labor Department, according to ADP spokesman Joel Prakken, who is also chairman of Macroeconomic Advisers.

"This is the third month in a row in which the report has suggested strong growth," said Prakken, adding that the trend sends an "unambiguous signal" that private sector employment is picking up.

Prakken said ADP's data is not affected by bad weather, which many economists blame for the much weaker-than-expected increase of 36,000 jobs in January's Labor Department report.

According to CNNMoney's survey of economists, the government report is expected to show that employers added 192,000 jobs in February, while the unemployment rate is forecast to tick up to 9.1% from 9% in January.

Meanwhile, it is too soon to say whether the increases in planned layoffs in January and now February represent a trend, according to John Challenger, CEO of Challenger, Gray & Christmas.

But there are a variety of factors that might continue the trend, with the sharp spike in oil prices among them.

"At the very least, rising energy costs could force employers to postpone hiring plans," Challenger said. "At worst, increased costs could kill the fragile recovery and spur another round of layoffs."

The surge in gas prices that followed rising oil might spillover to retail employers as well.

"If gasoline tops$4.00 per gallon in the coming weeks, consumers may be forced to make significant changes to their spending habits. At this stage of the recovery, that could be an extremely damaging setback," said Challenger.

Also on the horizon: More cuts in public sector jobs, which are already starting to materialize.

Government and non-profit employers announced 16,380 job cuts in February, up from 6,450 in January and 196% higher than a year ago.

"More job cuts at the federal level are expected in the months ahead as pressure mounts to cut costs and rein in the soaring national deficit," Challenger said.

The decline in government jobs is also evident in the report's geographical data, as the District of Columbia had 5,946 layoffs in February, putting it fourth among the 50 states and the district. To top of page

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