Private employers added 8,000 jobs in March, according to a report on Wednesday by ADP Employer Services, confounding economists' expectations that companies would trim payrolls in the face of a slowing economy.
The news on private-sector job growth bodes well for Friday's March jobs report from the Labor Department, some analysts said, while others discounted the significance of the ADP data.
"ADP is suggesting that private payrolls were up on average about 35,000 a month so far this year. Which means maybe better than 50,000-55,000 payroll jobs if you put in the public (sector)," said Jim Paulsen, chief investment officer at Wells Capital Management in Minneapolis.
The positive tone of the ADP data was corroborated by a separate report showing planned lay-offs by U.S. companies fell 26 percent in March from the previous month.
That was at odds with the assessment of the Federal Reserve chairman. Bernanke said told a congressional committee the economy could contract in the first half of this year, supporting suspicions of many that it might already be in recession, and unemployment would move higher.
Bernanke tempered his remarks, however, with a forecast of improvement later this year and next, giving stock market bulls a sliver of a reason to press on with Tuesday's gains, although at a much more moderate rate.
"He is basically pointing to potential recession in the first half. He is still anticipating further weakness in the housing sector and as well as a higher unemployment rate," said Brian Dolan, chief currency strategist at Forex.com in Bedminster, New Jersey.
Bernanke's weak economic outlook briefly led the dollar to pare its early gains versus the yen
Government bonds, which usually benefit from soft economic conditions, were mixed as some investors bet the Fed was near the end of its campaign of aggressive interest rate cuts.
GOOD NEWS, BAD NEWS
A government report showed new orders at U.S. factories fell for the second month in a row in February and by a much larger-than-expected 1.3 percent.
The ADP employment report provided a rare sign of hope for the struggling economy. However, after months of grim economic data, some analysts were reluctant to revise their forecasts for Friday's monthly jobs report based on the ADP numbers.
Analysts forecast Friday's jobs report to show a fall of 60,000 in March non-farm payrolls, according to a poll by Reuters.
Ian Shepherdson, chief U.S. economist at High Frequency Economics, in Valhalla, N.Y., said the ADP data was not a precursor of gains in Friday's government jobs report.
"This does not necessarily mean there was a real improvement in the state of the labor market in March because the data are very noisy from month-to-month and the shift from -18,000 in February to +8,000 in March is far too small to be statistically significant."
February's figure was originally reported by ADP as a drop of 23,000.
Employment consulting firm Challenger, Gray & Christmas Inc said planned lay-offs decreased to 53,579 in March from February's 72,091. Still, labor market weakness continued to spread from the financial sector, hurt by last year's mortgage debacle, to other areas of the economy.
For the second consecutive month, government and non-profit enterprises led job cuts, as the public sector suffered "from a precipitous drop in tax revenue" that has accompanied the economic downturn, Challenger said.
Wednesday's jobs reports offset some of the gloom that continued to come from the beleaguered housing market.
U.S. mortgage applications plunged last week, the Mortgage Bankers Association said, as the effects of the worst housing slump since the Depression wore on.
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