PRIVATE SECTOR HIRED FEWER WORKERS THAN EXPECTED IN AUGUST

Private-Sector Job Creation at 91,000; Layoff Pace Slows

Published: Wednesday, 31 Aug 2011 | 8:21 AM ET
By: Peter Guest
Staff Writer, CNBC.com

The private sector created 91,000 jobs from July to August, a shade below expectations, according to a report from ADP that sets the stage for a likely weak report on nonfarm jobs the government will release Friday.



ADP and Macroeconomic Advisors said service-sector jobs rose 80,000, down from an average increase of 115,000 over the past two months, while the goods-producing sector saw a gain of just 11,000.

Consensus estimates are that the government will show the economy created about 80,000 jobs overall in August—including the public sector—though some economists say the report actually could show a loss of jobs.

The ADP report showed that June's estimate of 114,000 jobs created was revised down to 109,000.

Despite the tepid pace of job growth, which is well below the amount needed to reduce the 9.1 percent unemployment rate, Joel Prakken, chairman of Macroeconomic Advisors, said the economy probably isn't in recession.

"Our best recession probability models say that the likelihood that we're actually in a recession right now is actually very, very small," Prakken told CNBC.

The ADP numbers came after a separate report showing that employers plan to cut 51,114 workers in August, 23 percent down on July's 16-month high of 66,414, according to consultancy Challenger, Gray & Christmas which also said 2011 layoff figures are 47 percent higher than August 2010.

In total, employers have announced 363,334 planned layoffs in 2011. California, the District of Columbia and New Jersey have been hardest hit, with the former experiencing 45,105 layoffs since January.

Government agencies, which have borne the brunt of the layoffs this year, announced their intentions to cut 18,426 staff, taking the total for the year to 105,406. Reductions in the civilian and officer ranks in the military were the main driver of the August cuts, the consultancy said.

"More workforce reductions at the federal level are undoubtedly coming down the road. Congress and the White House are under immense pressure to cut federal budgets and while the heaviest cuts are due in 2014, we will probably begin seeing some fallout starting this year and into 2012,” John Challenger, CEO of Challenger, Gray and Christmas, said in a statement accompanying the report release.

July's spike was largely due to sudden downsizing in the private sector, the report said.

"It is too soon to tell whether those cuts were an anomaly, but they appeared to be driven by industry- and company-specific trends, as opposed to larger economic ones," Challenger said.

With consumer and business spending still curtailed, the private sector is unlikely to increase its hiring, Challenger added. Jobs are being filled, but hiring is being offset by layoffs, retirements and other departures, he said.

"As a result, the net change in employment is not very impressive, but it is important for job seekers to realize that there are opportunities and that they should not give up because of some negative economic reports."