Private sector employment fell by much more than expected in the month of March, according to a report released by Automatic Data Processing, Inc. (ADP) on Wednesday, with the data likely to raise concerns about Friday's Labor Department report.

The report showed that non-farm private employment fell by 742,000 jobs in March following a revised decrease of 706,000 jobs in February. Economists had expected a decrease of 663,000 jobs compared to the decrease of 697,000 jobs originally reported for the previous month.

Peter Boockvar, equity strategist at Miller Tabak, said, The data speaks for itself, and if we see job losses eventually similar to the early 1980's on a population adjusted basis, 1 million jobs lost in a month will be seen at some point.

Weakness in both the service-providing sector and the goods-producing sector contributed to the bigger than expected decrease in jobs.

The service-providing sector lost 415,000 jobs, while employment in the goods-producing sector fell by 327,000 jobs. A decrease of 206,000 manufacturing jobs contributed to the continued decline in jobs in the goods-producing sector.

The report also showed job losses in all sizes of businesses. While large business lost 128,000 jobs, employment in medium-size and small-size businesses fell by 330,000 jobs and 284,000 jobs respectively.

ADP said that the steep drops in jobs in medium and small businesses indicate that the recession continues to spread aggressively beyond manufacturing and housing-related activities to almost every area of the economy.

As mentioned above, the bigger than expected decrease in private sector employment is likely to raise concerns about the outlook for the Labor Department's monthly employment report, which includes government jobs.

Economists currently expect the Labor Department report to show that employment fell by 656,000 jobs in March following a decrease of 651,000 jobs in February. The unemployment rate is also expected to rise to 8.5 percent from 8.1 percent in the previous month.

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