Economic Update – Unemployment Hits Midsize Businesses Hardest

As the job market continues to erode, it is employees at medium-size companies who are suffering the most. According to the newest ADP national employment report, almost one-half of the jobs lost from February to March were at companies with 50 to 499 workers. Overall, U.S. private employment decreased 742,000 from February to March, the report stated.The estimated change of employment from January to February was revised down by 9,000, from a decline of 697,000 to a decline of 706,000. March’s ADP Report estimates private employment in the service-providing sector fell by 415,000. Employment in the goods-producing sector declined 327,000, the 27th consecutive monthly decline. Employment in the manufacturing sector declined 206,000, its 37th consecutive decline. The sharp employment declines among medium- and small-size businesses indicate that the recession continues to spread aggressively beyond manufacturing and housing-related activities to almost every area of the economy. Economic activity in the manufacturing sector failed to grow in March for the 14th consecutive month, and the overall economy contracted for the sixth consecutive month, according to the nation’s supply executives in the latest Manufacturing ISM Report On Business. None of the 18 manufacturing industries reported growth in March. Manufacturing contracted in March as the PMI registered 36.3 percent, which is 0.5 percentage point higher than the 35.8 percent reported in February. This is the 14th consecutive month of contraction in the manufacturing sector. A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting. Meanwhile, retailer J.C. Penney Co. saw its senior unsecured notes downgraded to ‘Ba1’ and its proposed senior revolving credit facility assigned a‘Baa1’ rating by Moody’s Investors Service. The rating agency said it downgraded Penney’s senior unsecured notes based on the company’s prediction that operating results will continue to experience a decline in 2009 and will likely remain below their historic levels in the near future. Hertz Global Holdings Inc. will buy Advantage Rent A Car for $33 million, after the rental-car company’s bid won out over another offer for the company, according to The Dow Jones Newswires. Advantage, suffering along with the rest of the sector from the weak economy and tight credit, filed for Chapter 11 bankruptcy protection in December. The company, which posted 2008 revenue of $146 million, has 20 locations, down from 140 at its peak, the report stated. Hertz hasn’t been immune from those issues, having swung to a big fourth-quarter loss on charges. Revenue also fell 16 percent to $1.78 billion in the quarter. Just this week, Standard & Poor’s Ratings Services lowered Hertz’s long-term corporate credit rating two notches deeper into junk, the article stated. In the auto industry, meanwhile, General Motors Corp. and Toyota Motor Corp. led the six biggest automakers in the U.S. in posting smaller March sales declines than analysts estimated as spending on incentives rose to a record. U.S. industrywide sales fell 37 percent for a 17th consecutive monthly drop.