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WASHINGTON: The first data released on Wednesday after the victory of Barack Obama point to the huge economic challenges facing the US president-elect, with job losses accelerating and a key sector shrinking.
The private sector shed 157,000 jobs in October, far more than already pessimistic analysts had expected, according to the ADP National Employment Report. That marked a sharp acceleration from a loss of 26,000 jobs in September.
The survey underscored the prospects for a grim government jobs report on Friday. Most analysts expect the unemployment rate will rise from a five-year high of 6.1 percent in September.
Obama, an African-American Illinois senator, campaigned for a sea change in politics after President George W. Bush's eight years in office, defeating Republican John McCain on Tuesday to become the 44th US president.
The president-elect faces the biggest global financial crisis since the 1930s Great Depression and a host of domestic economic ills, including rising unemployment, falling home values and deeply shaken confidence, when he takes office on January 20.
ADP said its October report "offers evidence of a labour market that continues to weaken."
October was a brutal month as stock markets plunged amid the escalating global financial crisis. The struggling US economy lost 159,000 jobs in September as the weight of the housing collapse and credit crunch hit a broad swath of industries.
ADP said the goods-producing sector drove the October payrolls decline, shedding jobs for the 23rd consecutive month, by 126,000, while the manufacturing sector marked its 26th straight monthly decline, losing 85,000 jobs.
The country's huge services sector finally felt the pinch of a slowing economy that contracted in 0.3 percent in the second quarter and was heading toward recession.
The private sector shed 31,000 service jobs, the first decline in the ADP report since November 2002, when the economy was emerging from recession.
A separate report on the services sector offered further troubling signs for the world's largest economy.
The Institute for Supply Management's non-manufacturing index showed activity contracted more sharply than anticipated in October. The ISM reported on Monday the manufacturing sector contracted in the month to its lowest level since September 1982.
"The downturn is widespread as both manufacturing and services are all moving backwards," said Joel Naroff of Naroff Economic Advisors.
Naroff noted that labour markets tend to lag the economy, and predicted businesses would step up job cuts over the next three to six months.
"Friday's employment report is likely to be weak but the real job losses may not show up for a few months," he said.
"President-elect Obama is inheriting an economy that is on its back and we all need to wish him well because it is the world's economic well-being that is at stake."
Brian Bethune, chief US financial economist at IHS Global Insight, said that "services industries are now in full contraction mode, mirroring the recent intensification of general recessionary pressures in the economy."
However, he said that signs of a thaw in frozen credit markets, Federal Reserve interest rate cuts and the govenment's massive financial rescue programme could help services industries recover.
"Combined with improved profit margins, therefore, services industries seem reasonably well-positioned to weather the economic current storm and emerge on stronger footings when the economy gets back on track," Bethune said. - AFP/de
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