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US manufacturers slow hiring, service sector holds fort

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2014-02-11 11:58:47 - Depressed manufacturing activity due to a cold wave has affected new jobs aacording to the ADP National Employment Report, Team IFM reports

Depressed manufacturing activity in severe cold weather conditions dragged down recruitment in the American manufacturing sector in January, according to payroll-processing firm ADP’s monthly National Employment Report released ahead of Friday’s government hiring data.
Manufacturing lost jobs in January, the report said, noting that the decline of 12,000 followed a revised gain of 16,000 in the prior month and was the first decline in industry payrolls since July 2013.
Across sectors, however, fresh recruitments were at a steady clip at 175,000 – led by the services sector which accounted for more than 90 per cent of new jobs created.
However, the figure was much below ADP’s December initial estimate of 238,000 but nevertheless, was considerably above the disappointing 74,000 new jobs officially recorded.

It was also the smallest monthly addition to the US workforce since August.
“Cold and stormy winter weather continued to weigh on the job numbers,” said Mark Zandi, chief economist of Moody’s Analytics that compiles data for ADP.
American manufacturing activity has been particularly hit this winter, slowing considerably in January mainly on account of severe cold weather conditions, a slowdown in securing fresh orders and inventories, economic indicators of two sets of survey data released separately on Monday showed.
The Institute for Supply Management Manufacturing Business Survey said growth in the manufacturing sector was the slowest since May 2013. The second set of data, from the Markit US Manufacturing PMI by economy tracker Markit, came to similar conclusions.
But Zandi was optimistic about an upturn. “Gains are broad-based across industries and company sizes, the biggest exception being manufacturing, which shed jobs,” he said. “But that is not expected to continue.”
Service Sector
January recruitments were led by the service sector, which absorbed 160,000 people in January, down from an upwardly-revised December figure of 177,000, showed the ADP data that pertains only to the private sector and more often than not differs from government figures.
Service-providing industries added 160,000 jobs in January, down from an upwardly-revised December figure of 177,000.
Millan Mulraine, deputy head of US research and strategy at TD Securities, told news portal Business Insider that the enthusiasm with which this report WAS received by the markets was “admittedly” coloured by its recent poor performance in predicting the payrolls outcome.
“Notwithstanding this, given that the ADP estimate remains the only available indicator of its kind, it will continue to attract considerable attention by the market,” Mulraine said.
The sector’s performance in the US was in alignment with that of the global scenario; according to the JP Morgan Global Services Business Activity Index, global services business activity expanded for the 16th successive month in January.
At 53.8, up from 53.5 in December, the composite index produced by JPMorgan and Markit in association with ISM and IFPSM, a union of 43 purchasing associations globally, posted a reading close to last September’s two-and-a-half year high.
JP Morgan said on Wednesday that job increases were signalled for the US apart from a host of European nations, Japan and two BRIC countries – India and Brazil.
Commenting on the survey, David Hensley, Director of Global Economics Coordination at JPMorgan, said the global service sector maintained its solid growth momentum at the start of 2014, with business activity expanding at a slightly accelerated pace in January.
“Although demand growth slowed, companies’ positive outlook and continued willingness to take on additional staff suggest that the upturn is likely to track at around its current rate during the coming months.”
ADP Report
In the US, underlying job growth remains sturdy if one were to discount the weather, said Zandi of Moody Analytics in the ADP statement.
Apart from professional and business services, goods-producing employment rose by 16,000 jobs in January, down from a downwardly-revised figure of 50,000 in December. Nearly all of the growth came from the construction industry, which added 25,000 jobs over the month; this followed increases of 30,000 and 32,000 in the prior two months.
Expansion in trade, transportation and utilities slowed to a gain of 30,000 jobs in January, while financial activities and employment was flat over the month following two consecutive months of gains of 6,000 each month, said ADP.
According to its data, payroll growth for businesses with 49 or fewer employees decelerated in January, adding 75,000 jobs. “This is the slowest pace of small business job growth since August 2013,” ADB said.
Employment levels among medium-sized companies with 50-499 employees rose by 66,000 while that at large companies – those with 500 or more employees – increased by 34,000. However, while this represented acceleration in job growth for mid-size firms, growth at large firms was nearly half of what it was in December.
The matched sample used to develop the ADP National Employment Report was derived from ADP payroll data, which represents 411,000 US clients employing nearly 24 million workers in the country.
“As the market looks toward Friday's official employment report, [the] ADP estimate will again take on some importance as investors attempt to gauge the tone of labour market activity and position ahead of the payrolls release,” Millan Mulraine, deputy head of US research and strategy at TD Securities, told news portal Business Insider.

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