Using a double negative to describe today’s ADP employment report, though not grammatically acceptable, might be the best way to describe the report and the pending report from the U.S. Bureau of Labor Statistics due Friday. According to ADP, nonfarm private employment dropped by 84,000 jobs in December, the 23rd month in a row that employment has fallen. On the brighter side, this is the smallest decline since March 2008. ADP also revised its estimate for November job losses from 169,000 to 145,000.

The construction industry lost 52,000 more jobs in December, the 35th consecutive month of job losses. Employment in the services sector actually increased by 12,000 jobs while manufacturing jobs lost 43,000 jobs. Small businesses (employers with fewer than 50 employees) gained 11,000 jobs in December.

Job Satisfaction Ain’t What It Used to Be

ADP makes a prediction based on today’s report: “Employment losses are now rapidly diminishing and, if recent trends continue, private employment will begin rising within the next few months.” Maybe.

Why are job cuts moderating? A rising economic outlook is one possible reason. Another, less sanguine, possibility is that companies have sold through the piles of inventory that they had on hand through most of 2009 and now need to replenish their stocks.

If the latter, then there had better be some loose-fisted consumers out there willing to spend on the new production. But credit is still tight, both for consumer loans and mortgage loans. American consumers, once able to use their homes as ATM machines, have been forced to give up easy credit to consume less and to pay for it more quickly.

It bears repeating that about 70% of U.S. GDP comes from consumer spending. If that spending drops, so does GDP. The government’s $787 billion stimulus package helped replace lost consumer spending in the second half of 2009 and will continue to have an effect through the first half of 2010. After that, all bets are off.

In all, the government pumped about $2 trillion into the U.S. economy in 2009. It is highly unlikely that President Obama will seek a similar amount for this year and even more unlikely that Congress would agree to an increase of that size in the national debt. After all, 2010 is an election year, and increasing the national debt would not be an easy sell to voters.

Today’s ADP report may be encouraging to some analysts and politicians. Any slowdown in job losses is welcome. Still, the fragility of the drop in unemployment is clear. A rise in the price of oil, more restrictive lending, inflation fears, any one of a number of factors could send the economy, and employment, down the ladder again.

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