ADP sees nearly 700,000 job losses in December

By Edward Harrison On Jan 7, 2009

ADP, the payroll data company, has shown that the United States is going to see an even larger loss of jobs in December than we saw in November when the Bureau of Labor Statistics releases its figures this Friday. The number ADP put out is absolutely staggering: 693,000 jobs lost.

Needless to say, this number would confirm that unemployment will rise to at least 9 percent if not into the double digits before the recession is over.

Below is a story from the Guardian where they review the ADP numbers and detail new job cuts at Alcoa.

American businesses axed 693,000 jobs in December alone, according to the latest ADP employment index released on Wednesday, far more than analysts had been predicting.

The data shows that employment in the services sector dropped by 473,000 jobs while producers of goods axed 220,000. Large firms shed 91,000 workers while medium-sized firms cut 321,000 and small firms 281,000, suggesting that the recession has spread from America’s large manufacturing industries into the wider economy.

Paul Ashworth, senior economist at Capital Economics described the figure as “staggering”. It follows a 472,000 decline in November.

The ADP survey comes ahead of the US government’s own official non-farm payrolls figures on Friday. Ashworth said the ADP survey means “there is a downside risk to our forecast that the official figures will show on Friday that non-farm payrolls fell by 550,000 last month”.

Most other economists are predicting Friday’s data to show a loss of about 500,000 jobs in December

Earlier in the day, Alcoa, the world’s largest aluminum maker, said it will slash 13,500 workers as it drops production in the face of weakening demand – especially from the automobile industry – because of the global slowdown.

It is reducing its output by 135,000 metric tons, which brings its shut-offs to date to 750,000 tons or 18% of its smelting capacity.

The company is also planning to cut its investment in new plants in half.

The Guardian goes on to discuss the recent warning by Intel, which indicates that the U.S. technology sector is experiencing problems. You should also note that the ADP numbers show an increase in the number of service jobs lost. So this is not just manufacturing, housing and construction. A loss of over 500,000 jobs on Friday would bring the two-month total to over 1 million jobs lost at the end of 2008 in the United States. This is an unbelievably difficult macroeconomic background and, to my mind, indicates that Obama may be showing too much caution in his stimulus package.

See the video below for CNBC’s discussion of this report.