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ADP Report Shows Steep Job Losses

The ADP employment report shows that the U.S. economy lost 742,000 jobs in March, raising fears over what the Labor Department's report on Friday will show.

The latest ADP employment report, which showed that the private sector shed more than 700,000 jobs in March, may be indicating that economists are too optimistic in their expectations for the government's own report due on Friday.

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said its employment index showed that 742,000 jobs were lost by the U.S. private sector last month, indicating that the next government report on nonfarm payrolls, due Friday, could be the fifth straight to show that more than 500,000 U.S. jobs vanished.

Economists currently expect Friday's nonfarm payrolls report to show a loss of 656,000 jobs.

ADP, which is touts itself as the top source for the widest range of human resources information, payroll processing, and tax and benefits administration, compiles anonymous payroll data for its report, but does not include government jobs data.

Ian Shepherdson, chief economist with High Frequency Economics, says the ADP report is disappointing but not a major surprise to the market.

"We wondered if the inflection in some of the recent data -- retail sales, industrial production, durable goods, home sales -- might be enough to slow the rate of job loss for a time, but it has not," he said. "Companies will need to see stronger evidence of a sustained slowing in the rate of contraction in demand before the drop in payrolls will slow."

Shepherdson noted that the job losses in March were spread across all sectors and all size of employers, "but the rate of deterioration is faster for smaller companies and the services sector."

The ADP report has not been considered the most reliable predictor of how good or bad the Labor Department's employment report will be. For instance, ADP said last month that its February index showed that private-sector employment fell by 697,000.

Although that figure was revised Wednesday to 706,000, it is still well above the government's December total of 651,000 job losses.