According to Wednesday's report on private-sector hiring by payroll processor ADP, only 139,000 jobs were added last month. With government expected to shed more workers, we may see a below-forecast reading of 130,000 new jobs when the Labor Department issues its monthly jobs report Friday, said Moodys Analytics chief economist Mark Zandi, who runs the survey on which the ADP report is based.
The ADP report appears to have little effect on stocks so far Wednesday, but the short-term news gets worse from there.
The ADP jobs survey, which relies on employers' payroll records, is less sensitive to the effect of weather than the Labor Department's household survey, which relies on workers' own reports of whether they are working during the week including the 12th day of each month, Zandi said. Since the February survey week included bitter cold in much of the country, that could hold down the February numbers from Washington, Zandi said.
"The risks to the estimates are to the downside for February,'' said Zandi, guessing that Friday's report will disclose 130,000 new jobs, missing the consensus forecast of 150,000. His report said the financial-services industry actually shed workers last month, while industries including health care, leisure and hospitality that had been adding jobs rapidly slowed their pace.
The weather isn't the only short-term problem. Manufacturers are likely to pause after a wave of inventory accumulation in the third and fourth quarters that has brought stocks close to where they need to be in an expansion, he said. Consumer spending is likely to be hit at the margins by last year's cuts in food stamp funding, as well as the end of extended unemployment benefits to 1.3 million long-term unemployed.
"In the grand scheme of things, [the cuts] aren't massive, but they are substantial,'' Zandi said. "The combination of the two will shave a couple of tenths of a percent off [gross domestic product] growth" in early 2014.