U.S. private companies hemorrhaged nearly 700,000 jobs in February and the service sector slump deepened as the year-old recession showed little sign of abating, according to data released on Wednesday.
The private sector cut 697,000 jobs compared with 614,000 in January, according to an ADP Employer Services report that suggested hefty employment declines are on the way in the government's more comprehensive payrolls data on Friday.
The service sector slump accelerated in February, the Institute for Supply Management said, and contributed heavily to job cuts among private companies even though it is often more recession-resistant than other areas of the economy.
This is a slow 'U'-shape recession, said Kurt Karl, chief U.S. economist at reinsurer Swiss Re in New York. We are still sinking. There is no sign of a bottom.
The U.S. economy has already lost more than 3.5 million jobs since the beginning of this recession, which is likely to extend through the first half of this year or longer and become the longest in the post-World War Two era.
Indeed, a Federal Reserve report said U.S. economic conditions worsened in January and February and that businesses do not expect improvement until late this year or early 2010.
Top officials for the Federal Reserve said the immediate outlook for U.S. growth was grim but forceful policy action will help end a recession that appears to be getting worse at the start of its second year.
2008 was an annus horribilis -- a truly horrible year that only a sadist could look back upon with pleasure, said Dallas Federal Reserve Bank President Richard Fisher.
We might call this the Godzilla economy -- it presents a monstrous challenge.
Economists expect Friday's payrolls report, which gives a more comprehensive picture of the labor market than ADP, to show the economy shed 648,000 jobs in February alone, which would be the biggest monthly decline since 1949.
The unemployment rate is expected to have risen to 7.9 percent in February, which would be its highest in 25 years, when the economy was just pulling out of the deep recession of the early 1980s.
Financial markets have grown accustomed to dreadful economic data, however, and stocks managed solid gains by the close of New York trade despite Wednesday's grim figures.
U.S. government bonds, which usually perform better during times of economic weakness, lost ground.
NONE ESCAPE THE SWORD
The service sector represents about 80 percent of U.S. economic activity and accounted for more than half of the total private-sector job losses reported by ADP, reflecting the rapid deterioration of the economy in recent months.
None really escaped the sword here, Joel Prakken, chairman of Macroeconomic Advisers, whose firm jointly developed the ADP report, said about the service sector.
Economists had expected 610,000 private-sector job cuts in February, though forecasts ranged as high as 730,000.
Though the recession started in the housing and financial sectors it has cut a broad swathe of job destruction through the economy and stunned workers who once thought they would be spared.
Lillian Nazario lost her job as an administrative assistant at a Manhattan-based architectural design firm where she worked for 12 years.
I thought I was going to be this forever, Nazario, who is 47 years old, separated and raising two children, one of whom is in college.
We thought the new hires were going to be more affected, Nazario told a Reuters reporter at a New York Department of Labor office for re-employment services.
Nazario is representative a service sector that is in deep decline. The Institute for Supply Management said its non-manufacturing index -- a gauge of the service sector -- came in at 41.6 in February versus 42.9 in January.
The level of 50 separates expansion from contraction in the index, which dates back to July 1997. Economists had expected an even worse reading of 41.0.
3 MILLION MORE
The U.S. jobless rate is likely to push well above 8 percent by mid-2010 and may even top 9 percent, Prakken said.
He added that the unemployment rate would top 10 percent without the government's economic stimulus plan.
Prakken also told a teleconference of journalists that he expected the U.S. economy to lose 3 million jobs this year.
He said he expected the economy's contraction in the first quarter to be similar to the drop in gross domestic product seen in the fourth quarter, when the economy shrank at its fastest annual rate since 1982.
In one small piece of good news, planned layoffs at U.S. companies fell 23 percent in February from January's seven-year peak, outplacement company Challenger, Gray & Christmas said in its monthly report.
(Additional reporting by Robert MacMillan, Richard Leong and John Parry, Editing by Chizu Nomiyama)