WASHINGTON — Job losses narrowed and the massive US services sector expanded sharply in February, private data showed Wednesday, signaling a strengthening recovery ahead of a key government labor report.
Non-farm private jobs fell 20,000 in February on a seasonally adjusted basis, payrolls firm ADP said, matching the consensus forecast.
"The February employment decline was the smallest since employment began falling in February of 2008," the ADP National Employment Report said.
In another sign of an improving economy, the Institute of Supply Management reported services sector activity accelerated sharply in February from weak growth in January.
The ISM's non-manufacturing purchasing managers index (PMI) leapt 2.5 percentage points to 53.0 percent, beating the consensus forecast of 51.0 percent. Any number above 50 percent indicates growth.
Analysts noted that it was the highest reading in more than two years in the massive sector, which accounts for more of two thirds of the economy.
The data came ahead of Friday's highly anticipated government labor report, an important indicator of economic momentum.
Though the economy posted growth in the second half of 2009, snapping a year of contraction, the ailing labor market poses a major challenge to a sustainable recovery from the worst recession in decades.
Unemployment hovering near double digits has households hunkered down in the face of job insecurity. Consumer spending, which normally accounts for two-thirds of US economic output, has been lackluster.
The Labor Department's February labor data likely will offer little relief. Most analysts expect the unemployment rate ticked up to 9.8 percent from 9.7 percent in January, with nonfarm payroll losses unchanged at 20,000.
The ADP said that two large blizzards in parts of the East Coast had only a small effect on its survey findings, but warned that the official data from the Labor Department's Bureau of Labor Statistics, which includes government jobs, would be impacted.
"The adverse weather is widely expected to depress the BLS estimate of the monthly change in employment for February, but boost it for March," the payrolls firm said.
Ryan Sweet of Moody's Economy.com said that the report provides "a sense of how the labor market might have fared without the temporary disruptions from the storms."
He noted that ADP counts actual payrolls, unlike the government's survey which is "less likely to capture those people on short-term furloughs because of weather."
Joel Naroff of Naroff Economic Advisors said that because of the two different methods of calculating payrolls, "we are likely to see a lot larger drop in jobs on Friday than the 20,000 ADP estimates."
Still, he said, the ADP report shows that the services sector is firming and manufacturing is stabilizing, with firms either starting to add jobs or cutting payrolls more slowly.
"That holds out hope that once the weather turns decent again, which it apparently has started to do, we could start seeing the expected slow but steady increase in payrolls," he said.
The ADP said that 17,000 jobs were created in the services sector, the second consecutive monthly in the sector that drives more than two-thirds of the nation's output.
But that improvement was not enough to offset continued job destruction in the goods-producing sector, where 37,000 jobs were lost.
In that sector, 3,000 manufacturing jobs were created, the first rise since January 2008.
ADP noted that employment at medium-sized businesses -- employing between 50 and 499 workers -- rose for the first rise since January 2008, by 8,000.
Job losses in small businesses slowed 23 percent but still hit 18,000, or 90 percent of the month's losses.
Outplacement firm Challenger, Gray & Christmas, in a separate report, said companies announced plans to reduce payrolls in February by 42,090, a decline of 41 percent from January reading and the lowest level since July 2006.
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