By Burton Frierson
NEW YORK (Reuters) - U.S. private-sector employment fell sharply last month and planned layoffs at U.S. companies rose nearly 50 percent above year-ago levels, according to reports that may presage bad news in the government's labor market report due out on Thursday.
Wednesday's data also included a rare bit of good news from the slumping U.S. housing market. Mortgage applications rose last week with help from lower home loan rates, but the bounce follows a 6-1/2-year low the previous week.
However, late payments on U.S. home equity lines of credit rose to a 21-year high in the first quarter of 2008 due to continued stress in the housing market and general weakness in the economy, the American Bankers Association said.
U.S. private-sector employers slashed 79,000 jobs in June, the largest drop since November 2002, according to a report by ADP Employer Services, and much more than the 20,000 job cuts analysts had expected. May's numbers were also revised to show lower growth. All this led some to worry about a bleak outcome to Thursday's June U.S. payrolls report, which markets see as the most comprehensive job market gauge.
If recent history is any guide, said Ian Shepherdson, chief U.S. economist at High Frequency Economics, the ADP report could signal an astounding drop of 200,000 jobs in the official payroll numbers, much more than the fall of 60,000 that economists predicted in a Reuters poll.
"Expect a weak official (payrolls) report tomorrow," said Shepherdson, who is based in Valhalla, New York.
Stock futures pared gains after the weaker-than-expected report and the dollar extended its losses versus the euro.
U.S. government bonds, which perform better during times of economic weakness, rose after the report as investors bet the weakness in the labor market meant the Federal Reserve was less likely to raise benchmark interest rates to fight inflation.
Employment consulting firm Challenger, Gray & Christmas Inc said planned layoffs at U.S. companies fell 21 percent in June from May's 29-month high.
But, they were 47 percent above June 2007, while second-quarter cuts were the highest since late 2005. Planned job cuts at U.S. companies totaled 81,755, compared with 103,522 in May and 55,726 in June 2007, Challenger said.
In other labor market news, the Monster Employment Index edged down in June, as U.S. online recruitment eased slightly following the early springtime hiring period.
The Mortgage Bankers Association said its seasonally adjusted application index rose 3.6 percent to 477.7 in the week ended June 27, as 30-year fixed mortgage rates slipped 0.06 percentage point from a 10-month high to 6.33 percent.
U.S. housing, caught in the worst downturn since the Great Depression of the 1930s, has been stuck in a vicious cycle that extended through the normally buoyant spring sales season.
Until home prices show signs of stabilizing, many economists agree there is little chance that home sales will rebound meaningfully.
In its quarterly report on consumer borrowing, the American Bankers Association said the percentage of home equity lines that were more than 30 days past due rose to 1.1 percent from 0.96 percent the prior quarter.
That rate is the highest since the ABA started collecting the data in 1987.
(Editing by James Dalgleish)