Private Sector Sees Hiring Surge

Report Says 297,000 Jobs Added Last Month, Bolstering Hopes on Economic Growth

 

From the Wall Street Journal | Jan 6, 2010 | By SARA MURRAY

Private-sector employers picked up the pace of hiring significantly in December, a report indicated Wednesday, increasing optimism that the U.S. job market finally may be improving.

Companies in the private sector added 297,000 jobs last month, according to payroll processor Automatic Data Processing Inc. and Macroeconomic Advisers LLC, a consulting firm. The gain was the largest in their report's 10-year history.

The ADP numbers don't always match the government's official tally, which comes out Friday, but the data led analysts to lift their predictions for the Labor Department's report, which they now expect will show 165,000private-sector jobs were added in December.

A separate report, the Institute for Supply Management's survey of companies in the services and non-manufacturing sectors, climbed to 57.1 from 55 in November—the 12th straight month of growth. A level above 50 indicates expansion. The ISM survey of manufacturing firms released earlier this week also was strong.

"The economy is clearly gaining momentum," said Zach Pandl, a Nomura Securities International Inc. economist. "With that should come better jobs data."

Non-manufacturing firms were less upbeat about hiring, however. The survey found that employment at those companies continued to expand, but at a slower pace than in November. Fewer than one in five firms added workers, though hiring was strong in mining, retail trade, utilities and finance.

The latest reports, along with recent declines in initial claims for unemployment benefits, fueled optimism that economic growth is picking up. Most analysts expect the government to report later this month that the economy expanded at better than an 3% annual rate in the fourth quarter.

"I am increasingly confident that the recovery is both sustainable and likely to gain strength over the next several quarters," Federal Reserve Bank of Kansas City President Thomas Hoenig said Wednesday, according to the text of a speech he gave in Kansas City. "That said, I expect the recovery to be moderate."

The ADP report said that mostprivate-sector job gains last month came from the service sector, where payrolls rose by 270,000. Manufacturers added 23,000 jobs. Large companies, those employing more than 499 workers, added only 36,000 jobs in December. Firms with fewer than 50 workers added 117,000 and mid-sized firms added 144,000.

Fresh & Easy Neighborhood Market Inc., a supermarket chain with more than 150 stores in California, Arizona and Nevada, is in the process of hiring for 22 locations opening in California early this year, said Brendan Wonnacott, a spokesman. The company is looking to add 550 to 600 employees, about 200 of whom were hired in November and December.

"This is just kind of the next step in our expansion," Mr. Wonnacott said.

Seasonal adjustments may have inflated private-sector hiring data, analysts said. "Not all of what we're seeing this month is a fluke," said Joel Prakken, chairman of Macroeconomic Advisers. But he warned, "Approach today's number with an appropriate degree of caution."

The Labor Department report will also include federal, state and local government employment not covered by ADP. Fiscal woes at the state and local level have led to job cuts, offsetting some private-sector hiring. The ISM report noted that educational services and public administration were among the sectors still contracting.

Mr. Prakken said the Labor Department's report could show 200,000 to 250,000 private- and public-sector jobs were added overall in December. Other analysts' estimates are around 150,000.

Even if those estimates prove correct, U.S. employment remains far below the 2007 peak. As of November, there were 7.4 million fewer jobs than before the recession, and more than 15 million Americans were looking for work. "There's a tremendously huge hole to fill," said Jonathan Basile, a Credit Suisse Securities analyst.