Employers Shed Fewest Jobs Since February 2008

The January survey of employers by Automatic Data Processing showed that private sector employers shed 22,000 jobs in January.  December's job losses were also revised down, from 84,000 to 61,000, an improvement of 23,000 for the month.  The January job losses were the lowest since February 2008, which is when ADP's survey first showed that recessionary pressures were causing employers to lay off workers.

In the report, ADP said that employment in the services sector increased by 38,000.  This was the second month in a row where employment in that sector rose.  However, that increase was offset by a decline of 60,000 in the good producing sector.  Manufacturing shed the most jobs, with 25,000 jobs lost.

Large and small employers continued to cut their payrolls, with employers of 500 or more laying off 19,000.  Small businesses, defined as those with less than 50 workers, cut 12,000 jobs.  However, medium sized businesses, with 51-499 workers, added 9,000 workers.  This was the first gain in employment among these businesses since January 2008.

The ADP report is seen by many as a precursor to the government's payroll figures, which will be released on Friday.  It tends to be more negative than the government's report, totaling 500,000 more job losses than the Labor Department in the six months ending December 2009.

The consensus estimate was for a loss of 30,000 jobs, with estimates ranging from a gain of 50,000 jobs to a loss of 110,000.  Thus, the actual data came in better than the consensus, around the midpoint of estimates.

Analysts said the ADP number showed that the labor market is headed in the right direction.  An economist at Ameriprise Financial in Detroit said the data shows "trends are heading in a positive direction for the labor market."  He added that companies are starting to hire again as they start to believe "the economy does have legs."

While it's often said that jobs are a lagging indicator and we have often said that listening to those who say "this time is different" is a good way to lose money, that may very well be the case this time.  Consumer spending is two thirds of the economy and until the consumer feels secure about the employment picture, it's likely to remain tepid.

There cannot be a strong recovery without the jobs picture improving.  And that's why Friday's report from the Labor Department is so important.  Investors may want to protect their gains ahead of that report by either taking profits or using trailing stops to protect gains.

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