Diane Swonk, Chief Economist
Mar. 3, 2010 – 7:40 a.m. CT
Precursor to Friday Employment Report Not Encouraging
Today's ADP report, which is a precursor to the employment report for February, showed a decline of 20,000 in February - the smallest decline since early 2008, but still negative instead of positive. Moreover, the ADP report is less sensitive to weather-related losses than the report that will be released on Friday by the government, and hence, is understating (by as much as 100,000-200,000) the losses we will see in the official data for February.
Separately, the government started hiring for the 2010 census during the month, which means that private sector job losses were even greater. The blow to construction was particularly large, especially once you add weather-related disruptions back into the equation.
On the bright side, manufacturing employment looks like it may have posted its second monthly gain. Production has picked up as inventories have fallen even below lackluster demand in recent months, and now must be replenished.
The Bottom Line: Firing continued to outpace hiring in February, but the pace of layoffs is clearly abating, and we are close to a tipping point. Increased hiring associated with the census, and the catch-up from weather delays in February, virtually ensure a RISE in employment in March. An economy that must rely upon census hiring and better weather to produce employment gains, however, is not exactly something to pop champagne corks over. Indeed, preliminary data suggest that the economy is losing instead of gaining momentum in the first quarter - an uncomfortable but predictable reality, given the ravages of the financial crisis.
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