US private employment leaps in December: ADP report

The U.S. employment situation might be seeing better times, according to figures released in the latest ADP Employment Report for December, which showed a rise for the second consecutive month.

Private sector employment rose by 297,000 from November to December, the report stated.

Nonfarm private employment grew at a pace well above what is usually associated with a declining unemployment rate, the report added.

Unemployment rate in the U.S. was 9.8 percent in November, heightening concerns about a sluggish job growth and job creation.

Economists stated that for the unemployment rate to really fall, about 200,000 jobs need to be created every month. The current ADP report gives hope, based on that statement.

December's ADP increase is more than triple the 92,000 estimate for November, Paul Ashworth, an economist at Capital Economics, said in a note.

The question is can this survey be trusted? Other indicators point to a modest improvement in labour market conditions, but nothing like the acceleration implied here, he added.

Much of the increase was seen the service-providing industry, which grew by 270,000 in December. The rise is the largest monthly increase in the history of the report, as well as the eleventh consecutive monthly gain.

Employment in the goods-producing sector and manufacturing also showed increases while construction remained unchanged in December, a refreshing change from the constant declines since June 2007.

Small businesses saw the most increase, hiring about 117,000 people during the month.

November and December are generally the holiday season and 2010 witness a rise in spending from last year as more consumers hit the shops for gifts this season.

Some of the rise in employment could be attributed to additional help hired by stores during the holiday season.

The official employment data is due from the U.S. government on 7^th January, Friday. Economists polled by Reuters expect nonfarm payrolls to rise by 140,000 during December and the unemployment rate to remain steady at 9.8 percent for the second month.

However, the fall in initial jobless claims is not a true indicator that the job market is improving as it occurs simply because many of the long-term unemployed people have used to their full allocation of 99 weeks of benefits, Paul Dales, an economist at Capital Economics, said in a note.

Given that the ADP survey has recently been under-estimating employment compared with the official figures, there is even a possibility that non-farm payrolls could come in above 300,000. However, taking into account the more modest improvement in the other indicators, we still think that a range of between 150,000 and 200,000 is the most likely outcome for Friday, Ashworth said.