Companies in the U.S. boosted payrolls in December by the most since records began in 2001, showing a stronger labor-market recovery at the end of last year, data from a private report showed today.
Employment increased by 297,000, exceeding the highest projection in a Bloomberg News survey, after a revised 92,000 rise in November, according to figures from ADP Employer Services. The median estimate in the Bloomberg survey called for a 100,000 gain last month.
Faster job growth will fuel the income gains necessary to further spur consumer spending, which accounts for about 70 percent of the economy. A Labor Department report in two days will show companies added 150,000 workers last month and the unemployment rate eased to 9.7 percent, according to the Bloomberg survey median.
“The headwinds for the recovery are fading,” said Jim O’Sullivan, global chief economist at MF Global Ltd. in New York. “Companies have been pretty cautious and they’ve accumulated a lot of spending power, and we’ve seen that in purchases of equipment and software. Now they need more workers to man the equipment.”
Stock-index futures trimmed earlier losses after the report. The contract on the Standard & Poor’s 500 Index maturing in March fell 0.3 percent to 1,261.5 at 8:57 a.m. in New York. The index was down as much as 0.8 percent today. Treasury securities dropped, sending the yield on the benchmark 10-year note up to 3.39 percent from 3.33 percent late yesterday.
Previous Six Reports
Over the previous six reports, ADP’s initial figures were closest to the Labor Department’s first estimate of private payrolls in July, when it understated the gain in jobs by 29,000. The estimate was least accurate in October, when it underestimated the employment gain by 116,000.
ADP’s initial November estimate showed a 93,000 gain in private employment compared with the government’s estimate of a 50,000 increase. October payrolls rose 79,000. Projections among the 33 economists surveyed by Bloomberg for December ranged from gains of 50,000 to 150,000.
“There is certainly a strong signal in the ADP data,” Joel Prakken, chairman of Macroeconomic Advisers LLC, which produces the figures with ADP, said in a conference call with reporters. “It has accelerated in each of the last three months and the gains that we reported this morning were widespread.”
Today’s ADP report showed an increase of 27,000 workers in goods-producing industries, which includes manufacturers and construction companies. It was the biggest gain since February 2006 and the second straight rise. Service providers added 270,000 workers, the 11th straight gain and the most since record-keeping began.
Employment in construction was little changed, the first time without a decline since June 2007, while factories added 23,000 jobs, ADP said.
Companies employing more than 499 workers expanded their workforces by 36,000 jobs. Medium-sized businesses, with 50 to 499 employees, created 144,000 jobs and small companies increased payrolls by 117,000, ADP said.
Employers in the U.S. announced plans in December to cut 32,004 jobs, the fewest since June 2000, according to Challenger, Gray & Christmas Inc. The Chicago-based outplacement company said firings were down 29 percent from December 2009.
Overall payrolls probably rose by 135,000 in December, according to the median forecast of economists surveyed before the Labor Department’s Jan. 7 report. The difference from the projection for private employment reflects the inclusion of government jobs in the overall payrolls figure.
Federal Reserve policy makers said that improvements in the economy didn’t meet the threshold for scaling back their plans to purchase $600 billion in bonds to help bring down the unemployment rate that’s close to 10 percent.
“While the economic outlook was seen as improving, members generally felt that the change in the outlook was not sufficient to warrant any adjustments to the asset-purchase program, and some noted that more time was needed to accumulate information on the economy before considering any adjustment,” the Fed said in minutes of its Dec. 14 policy meeting, released yesterday in Washington.
Some retailers are boosting payrolls after the holiday shopping season. Macy’s Inc., the second-biggest U.S. department-store chain, said yesterday it will add about 725 new positions over the next two years to support the growth of macys.com and bloomingdales.com.
Other companies may not hire as much as last year. Broadcom Corp., the biggest maker of chips for television set-top boxes, last month increased its fourth-quarter revenue projection to about $1.9 billion. While the Irvine, California-based company sold more chips for mobile-phone handsets, and Wi-Fi, Bluetooth and global-positioning systems, this year’s pace may ease, limiting hiring.
“In a year like 2010, it grew so fast, there’s no way we could hire to keep up, frankly, unless you really reduce the quality of people you hired,” Scott McGregor, chief executive officer of Broadcom, said on a Dec. 14 teleconference with analysts.
“I don’t believe that we’ll do the same kind of hiring as we did” in 2010, McGregor said. “I think the industry probably is forecast to grow less next year and I think we would moderate our hiring correspondingly.”
The ADP report is based on data from about 340,000 businesses employing more than 21 million workers.