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March ADP Payroll Report Not So Rosy


The March report from Automatic Data Processing Inc. (ADP) shows that private employers in the U.S. cut 23,000 jobs in the month of March. In February, ADP reported 24,000 job losses. In December 2009, private employers eliminated 84,000 jobs. So things are getting worse more slowly, or improving somewhat, depending on your point of view.

Analysts expected ADP to report the addition of 40,000 jobs. If there’s any good news forthcoming, it will be in Friday’s unemployment report from the U.S. Bureau of Labor Statistics, which is expected to show that the U.S. gained 190,000 jobs in the month of March. Most of that growth, however, will come in the government sector, reflecting the addition of workers to conduct the 2010 census.

The March decline in employment is the smallest since job losses began mounting in February 2008. That’s some good news at least, but not enough.

The goods-producing sector lost a total of 51,000 jobs in March while the service-providing sector gained 28,000 jobs. More than half the job losses in the goods-producing group came from small businesses and more than half the improvement in service jobs came from small businesses. If small business is the chief producer of jobs in the U.S. economy, then the engine is sputtering.

It remains to be seen whether or not the federal Hiring Incentives to Restore Employment Act, known as HIRE, will have any impact on small business employment. The $17.6 billion program offers small employers tax breaks for hiring workers who have been unemployed for at least 60 days. The total benefit for hiring a worker at an annual salary of $25,000 amounts to $1,550. Not bad, but not game-changing either.

In order to get the tax break at the end of the year, an employer has to spend more than $2,000/month in salary alone for a new worker. And cash flow is forever a concern for small businesses. A business that is seeing increased demand for its goods or services might jump on this offer, but one that is recovering more erratically is unlikely to put that much cash on the line for such a small return.

Compounding the problems facing employers, the Chicago Purchasing Manager’s Index fell from 62.6 in February to 58.8 in March. That’s a bigger-than-expected drop and breaks a run of 5 months in which the PMI was rising.

Adding to the mixed data on employment and the U.S. economy, the U.S. Commerce Department’s report on factory orders showed a 0.6% rise in February. Good news, yes, but January’s increase was 2.5%. And manufacturers’ inventories are not growing, indicating that they have little confidence in a robust recovery.

The Obama administration has got to be worried about all these mixed signals. It needs a piece of big, good economic news going into the fall mid-term elections. The U.S. economy just doesn’t look like it’s ready to provide the story.

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