The rapid contraction of US manufacturing activity appears finally to be slowing, a survey showed yesterday, spurring tentative hopes that the country’s economy could be stabilising.
ADP’s closely watched monthly employment survey showed job losses accelerating last month, as companies kept shrinking in response to falling sales. Almost 100,000 more jobs were cut than economists were expecting.
Revisions to February’s job numbers showed 9,000 more jobs were lost than originally estimated, putting that month’s total job losses at 706,000.
“It does suggest that the labour market remains very fragile and that the outlook is dismal,” said Samarjit Shankar, director of global strategy at Bank of New York Mellon.
A separate survey showed that US factory activity shrank in March for the 14th consecutive month, though the pace of its decline has slowed. The Institute for Supply Management said its index of national factory activity rose to 36.3 in March from 35.8 in February, slightly better than economists were expecting. A figure below 50 shows the sector is contracting.
However, the focus on Wednesday was on the ADP numbers, which sent ripples of concern through markets that the US government’s monthly jobs data – seen as one of the most important indicators of the US economy’s health – would also be dire when released on Friday.
”It’s a terrible number. It is almost a loss of three quarters of a million jobs which is possibly the highest we have seen so far over the length of this crisis. Obviously [it is] foreboding ahead of [Friday’s] non-farm payrolls report,” said Matt Esteve, foreign exchange trader at Tempus Consulting.
In recent weeks, there has been a scattering of better-than-expected data emerging from the US economy, such as rising mortgage applications and steadying retail sales. They have prompted a cautious optimism among some US politicians, including President Obama, who said last week there were “glimmers of stabilisation” in the US economy.
Wednesday’s jobs numbers are a blow to those hopes. “We wondered if the inflection in some of the recent data…might be enough to slow the rate of job loss for a time, but it has not,” said Ian Shepherson, chief US economist at High Frequency Economics. “Companies will need to see stronger evidence of a sustained slowing in the rate of contraction in demand before the drop in payrolls will slow.”
A breakdown of the ADP data shows that the pain was spread throughout the economy, with large, mid-sized and small businesses all cutting a similar number of jobs. The goods-producing sector, including construction and manufacturing companies, cut 327,000 jobs while service providers cut 415,000.
ADP changed the methodology of its survey in December after it significantly undershot the US government’s labour report. FT