The pace of U.S. job losses continued to slow in September as the private sector shed fewer jobs than in the previous month, according to a report offering a preview of government data due Friday.
Meanwhile, gross domestic product decreased at a 0.7% annual rate in the second quarter, better than the 1% decline previously estimated, the Commerce Department said Wednesday. It was a big improvement over GDP's 6.4% decline in the first quarter.
Private nonfarm payrolls fell by 254,000 in September, down from the 277,000 drop in August, according to a report by Automatic Data Processing Inc. and forecasting firm Macroeconomic Advisers released Wednesday.
"We know that the pace of labor-market recovery always lags broader economic activity," said Ian Pollick, a TD Securities analyst. So "if the actual economic recovery is gradual we have to say the labor-market recovery is tepid at best."
Separately, the Chicago Purchasing Managers' Index provided a jolt of unexpectedly bad news, falling to 46.1 in September from 50. The drop below 50 indicates that manufacturing activity is contracting. A decline in new orders contributed to the fall, which was particularly surprising given improving regional reports elsewhere, such as the Philadelphia and New York Federal Reserve Bank manufacturing indexes.
September's job losses were the smallest since July 2008. Analysts expect a similar level of job losses in the official employment report the U.S. Labor Department is set to release Friday that includes public-sector jobs, though it may be slightly smaller than the drop ADP reported.
The job losses were especially severe among businesses with fewer than 50 workers. Those companies shed 100,000 jobs compared with the 93,000 jobs lost at medium-size firms and the 61,000 lost at large employers with 500 or more workers.
The labor market is slowly improving compared with earlier this year but it remains weak. Economists expect the unemployment rate to hit 9.8% in September, up from 9.7% in August. Even with the high unemployment rate threatening consumer spending in the third quarter, many economists are predicting GDP grew between 3% and 4%.
The anticipated return to growth is buoyed by Wednesday's report showing that second-quarter GDP wasn't as bad as expected. Both business investment and consumer spending, which is the largest component of GDP, were revised upward.
There were few signs that inflation could soon become a threat to the economy as the government's price index for personal consumption rose 1.4% in the second quarter instead of the previous 1.3% estimate. Excluding food and energy, the price index climbed 2%.
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