Job Cuts Data Shows Improvement

There’s good news for the economy as it continues on its path to recovery from the worst recession since the 1930s. ADP Employer Services, a payroll processing company, has announced that February saw only 20,000 job cuts, which is a major improvement from the 60,000 cuts seen in January. It is also a 77% improvement over the job cuts seen in the same month last year.

The ADP data shows that February was the eleventh straight month when the job cuts number saw a decline, and this is the lowest level in almost three years. The data only includes private sector employees, but as far as the trend is concerned, it is seen as a good representative of the overall economy. The company’s data is based on the activity of more than 360,000 businesses. It processes payrolls of almost 22 million employees from these businesses, which lends a lot of credibility to its data.

An important aspect about these job cuts is that most of them have been the result of merger and acquisition activity. This is in contrast to the job cuts that were being seen throughout last year, which mostly had to do with helping the companies survive.

The service sector has already started hiring, and according to the ADP data, February saw an addition of 17,000 employees in this sector. On the other hand, 37,000 workers lost their jobs in the manufacturing sector. The data also showed that while both large and small businesses continue to cut jobs, mid sized companies have started hiring. Among the large companies, IBM reduced its workforce, while Caterpillar Inc. has started recalling its workers.

The job cuts data is in line with what most economists had been expecting and the projections are that in the next 2-3 months we should start seeing job additions. That would be a major turning point for the economy which has seen the unemployment rate climb to 9.8%. Since the recession began, more than 8 million jobs have been lost across the country.

Although many companies have started seeing improvements in sales and profits, most of them want to make sure that the recovery is sustainable before they start hiring again. It is a well established fact that employment recovery generally sees a lag of 6-12 months even after a country has come out of recession. If the economy stays on track, as it is expected to, we should soon start seeing people getting back to jobs.

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