Labor market shows weak growth in December

NEW YORK (Reuters) - Private-sector job growth slowed in December and the number of people receiving jobless benefits hit a two-year high in late December, reports released on Thursday showed.

Even so, U.S. stocks rose as traders worst fears about the jobs data did not materialize and raised hopes the economy may avoid a recession.

Financial markets are waiting for the government's employment report on Friday, and the "latest ADP number will fit with the idea that growth continues to lose momentum," said Alan Ruskin, chief international strategist at RBS Greenwich Capital in Greenwich, Connecticut.

However, it does not resolve "the debate about whether the economy tips into recession or simply records a period of very soft growth near a stall speed at close to 1 percent," he said.

The median estimate of analysts polled by Reuters puts payroll growth for both government and private sector jobs in December at 70,000.

The Federal Reserve began a series of interest rate cuts in September in response to housing and credit problems. Fed policy-makers are scheduled to meet at the end of January and are expected to cut interest rates again.

"Nothing is better at keeping the Fed easing than falling payrolls," said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York.

In another sign labor demand is softening, Web advertising to fill jobs plunged in December to its lowest since last January as a year-end seasonal slowdown met further moderation in recruiting, another report showed.

Employment continued to fall in construction and financial services, the two sectors of the U.S. economy hit hardest by the housing slump and credit crisis, according to ADP Employer Services.

ADP, whose private employment service report was jointly developed with Macroeconomic Advisers LLC, said U.S. private employers added 40,000 jobs in December, or less than the 50,000 new jobs economists surveyed by Reuters expected.

It was the first deceleration in the number of new private-sector jobs since August and was the second lowest number created in any month since June 2003, when U.S. private employers shed 7,000 net jobs.

The bulk of private sector jobs gains in December were in the services sector, which added 71,000 new jobs, ADP said.

ADP also said it revised downward the number of jobs created in November to 173,000 from 189,000.

The number of U.S. workers filing new claims for jobless aid tumbled by 21,000 last week, the Labor Department said.

First-time applications for state unemployment insurance fell to a seasonally adjusted 336,000 last week, from 357,000 the prior week, the government said.

In another government report, new orders at U.S. factories surged a larger-than-expected 1.5 percent in November on a big rise in orders for nondurable goods, the Commerce Department said.

Analysts polled by Reuters were expecting factory orders to climb 0.7 percent.

Orders for durable goods, items intended to last three years or longer, fell a downwardly revised 0.1 percent, the fourth consecutive monthly decline in that category.

Declines in orders for machinery, electronic products and defense equipment dragged down durable goods orders, which were originally reported to have gained 0.1 percent.

The Commerce report, which showed resilience among U.S. factories in November despite the credit crunch and housing downturn, follows Wednesday's Institute for Supply Management's index showing factory activity contracted in December.

U.S. government debt prices extended losses after the unexpectedly strong factory data, while major stock indexes edged higher. On Wednesday, debt prices rose and stocks fell after the weak ISM report.

In another jobs-related report, planned layoffs by U.S. companies fell 39.3 percent in December from the previous month and were down 18.7 percent from a year ago, employment consulting firm Challenger, Gray & Christmas Inc said.

The figure for total planned job cuts last year was 8.5 percent lower than in 2006, the Challenger report said.

December planned job cuts in U.S. companies totaled 44,416, down from 73,140 in November, and the year total was 768,264, down from 839,822 in 2006, Challenger said.

The financial sector suffered the most planned job cuts in 2007, a result of the fallout from subprime loans.

But fears of a spillover through the rest of the job market did not appear to be borne out by the data, the report said.

In yet another report, Monster, a global online recruiting firm that gauges U.S. online labor demand, said its Employment Index fell to 169 points in December from 183 in November. The index was 167 a year ago and 168 in January 2007.