WASHINGTON U.S. private companies added workers at a brisk clip in December, pointing to underlying strength in the economy despite signs that growth slowed sharply in the fourth quarter.
While other data on Wednesday showed a slight moderation in services sector activity last month, details of the survey were fairly upbeat and suggested a pickup in the coming months.
The economy is battling the impact of a buoyant dollar, inventory glut and relentless spending cuts by energy firms, which have been hurt by lower oil prices. These headwinds have hobbled manufacturing and strained exports.
"Today's data may not have been uniformly strong, but investors have little cause to be concerned about the U.S. economy," said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.
Payrolls processor ADP said private-sector employment rose by 257,000 last month, the largest gain since December 2014, after increasing by 211,000 in November.
Although the ADP data tends to overstate job gains in December because of a year-end accounting quirk, economists said there were no signs the labor market was slowing.
The ADP report, which was jointly developed with Moody's Analytics, was released ahead of the government's more comprehensive December employment report on Friday.
According to a Reuters survey of economists, nonfarm payrolls probably increased 200,000 last month, on top of the 211,000 jobs added in November. The unemployment rate is seen unchanged at a 7-1/2-year low of 5 percent.
In a separate report, the Institute for Supply Management said its nonmanufacturing index fell to 55.3 percent in December from a reading of 55.9 percent in November. A reading above 50 indicates expansion in the services sector, which accounts for more than two-thirds of the economy.
There were indications of strength in the report's details, and ISM said comments from the majority of industries "remain positive about business conditions and the overall economy."
Industries reported an increase in both new and export orders, as well as a rise in employment. However, inventory growth continued to slow and many industries still considered stocks to be high.
"The undertone of this report was broadly constructive as the pick-up in the forward-looking indicators suggests some modest rebound lies ahead," said Millan Mulraine, deputy chief economist at TD Securities in New York.
Eleven non-manufacturing industries, including retail trade, finance and insurance, and professional services reported growth last month. The five industries reporting contraction in activity included wholesale trade and transportation and warehousing.
U.S. financial markets were little moved by the mixed data as investors focused on the impact of slowing growth in China, a sharp fall in oil prices and heightened geopolitical concerns. Stocks on Wall Street were trading lower, while prices for U.S. government debt rose. The dollar was flat against a basket of currencies.
TRADE DEFICIT SHRINKS
In a third report, the Commerce Department said the trade deficit narrowed in November as imports of goods fell to their lowest level in nearly five years, hinting at softening domestic demand amid an effort by businesses to trim bloated inventories.
The trade gap fell 5.0 percent to $42.4 billion in November.
Despite the shrinking trade deficit, declining exports were the latest suggestion that economic growth braked sharply in the fourth quarter. The drop in imports could also be pointing to cooling domestic demand, which was flagged by weak automobile sales in December.
Trade, which subtracted 0.26 percentage point from gross domestic product in the third quarter, is likely to have remained a drag on growth in the fourth quarter.
Reports on construction spending and auto sales have also been weak, prompting economists this week to slash their fourth-quarter GDP growth estimates by as much as one percentage point to as low as a 0.5 percent annual pace.
The downward revisions also accounted for the impact of unseasonably warm weather on sales of winter apparel and other merchandise. The economy grew at a 2 percent annual rate in the third quarter.
Imports of goods dropped 2.0 percent to their lowest level since February 2011. Imports of industrial supplies and materials were the weakest since May 2009. Capital and consumer goods imports also fell.
Lower oil prices as well as increased domestic energy production also helped to curb the import bill. The price of petroleum averaged $39.24 per barrel in November, the lowest in nearly seven years.
Goods exports slipped 1.1 percent to their weakest level since June 2011. Exports of industrial supplies and materials hit a five-year low, while non-petroleum exports were the weakest since June 2011.
The decline in exports to the United States' main trading partners was nearly broad-based in November. But the politically sensitive U.S.-China trade deficit fell 5.2 percent to $31.3 billion in November.
A fourth report from the Commerce Department showed new orders for factory goods fell in November and inventories declined for a fifth straight month.
(Reporting by Lucia Mutikani; Additional reporting by Dan Burns in New York; Editing by Paul Simao)
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