While lawmakers argue about how government can best create jobs, the public sector continues to be a major source of pain for the American job market. Once again, Friday's unemployment report could reflect a hit from government job cuts.
Unofficial jobs indicators released today emphasized the toll that government job cuts are taking on an already shaky job market. Private payroll firm ADP reported today that nonfarm private businesses added 110,000 jobs in October, down slightly from a revised 116,000 added in September. Though continued signs of life in the private sector are encouraging, this job growth is also likely to be diminished further by cuts in the public sector.
"If the government sector, particularly the state and local government sector, continues to shed jobs as it has been in recent months, I would expect on Friday a number that is somewhat below the 110,000 we're reporting here today," Joel Prakken, chairman of Macroeconomic Advisers, said this morning. In recent months, government has consistently either subtracted jobs or added a minimal number.
Though estimates vary, many experts say that the economy needs to add roughly 125,000 jobs per month to keep pace with population growth, and 200,000 jobs per month to bring down the 9.1 percent unemployment rate.
Outplacement firm Challenger, Gray, and Christmas also announced today that U.S. employers' planned job cuts in October dropped below 43,000, down 63 percent from September, which saw the most planned cuts since April 2009. While the drop is encouraging, job cuts this year are well ahead of 2010's pace, and government is leading the way. Of the 521,000 job cuts announced in 2011, nearly one-third have come from the government sector.
Cuts in government have wiped out a good number of private job gains, according to monthly government jobs reports. And though public sector cuts slowed significantly last month, from 54,182 cuts in September to 2,785 in October, the pain isn't over, says John Challenger, chief executive officer of Challenger, Gray, and Christmas.
"We have yet to see the full impact of mandated federal spending cuts. Anticipated cuts at the U.S. Post Office alone could result in more than 200,000 job cuts," Challenger said in a statement accompanying the release.
The data also highlight other longstanding trends. The services sector continues to drive job growth: according to ADP's data, all October private job gains came from service industry employers, which added 114,000 jobs in October. Meanwhile, goods-producing industries subtracted 4,000 jobs. Likewise, small- and medium-sized firms added all of the jobs in October; large firms (those with more than 499 employees) subtracted 1,000 jobs.
The ADP report is being credited with boosting the Dow Jones Industrial Average this morning. The Dow is up more than 150 points , after losing nearly 300 points on Thursday after news of a referendum in Greece on accepting the EU's bailout package fueled international worries about the European Union's ability to overcome its sovereign debt crisis.