After the release of a disappointing ADP jobs report, the Dow Jones industrial average dropped 2.22 percent on Wednesday, the market's worst day since August. Analysts had projected an increase of 175,000 jobs from April to May; ADP reported a gain of just 38,000.
The Dow closed down 279.42 points.
Brett Ryan, an economist at Deutsche Bank, doesn’t expect a prolonged downturn.
“We think this is a temporary slowdown that will begin to reverse itself at some point over the summer as energy prices level off and as a lot of these supply disruptions correct themselves,” he said, calling the current economic slowdown a “soft patch.”
The ADP is not always a good predictor of the official jobs numbers, which will be released by the Labor Department on Friday.
“It can miss,” Ryan said of ADP. “It can underestimate or overestimate payrolls on occasion because they incorporate the jobless claims data.”
Still, it’s been a bad week for economic news. On Tuesday came the revelation that home prices fell 4.2 percent and hit a new low in the first quarter of 2011, according to data released by Standard & Poor's and Case-Shiller. The National Association of Realtors’ pending home sales index fell 11.6 percent on last Friday, shocking economists who had predicted a 1 percent decline.
U.S. manufacturing growth also slowed substantially in May, as the ISM index fell to 53.5, its lowest level since September 2009. New orders, production, and export measures all plunged.
Katy O'Donnell contributed
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