Confusion… even good news comes with a slap. ADP (the largest payroll provider in the USA) said USA non-farm private payrolls grew 91,000 in September 2011 – a sickly number (basically unchanged growth from August) but great when most analysts expected less good data.
Overshadowing this “good” news, outplacement agency Challenger, Gray & Christmas, Inc. reported such large September layoffs (115,000) that 3Q2011 will end up being the worst layoff quarter since 3Q2009. However, this headline is somewhat sensationalized as:
- it includes a military force reduction of 50,000 over four years, and military is not counted as employed anyway; and,
- it fails to note a 76,551 jobs hiring number which is the largest since October 2010, and the third largest since the end of the recession.
Although this positive jobs growth data has many relieved that a recession is not yet occurring, the data itself has not broken the negative trends in small and medium sized business which historically create most of the new jobs (analysis here).
Overall, Econintersect continues to be concerned as employment growth remains well below the labor market population growth.
The ADP data says manufacturing / goods employment is not growing, and is consistent with the less good data Econintersect is seeing in exports and transports. All the relative strength is in the service sector which has literally provided almost all the jobs growth to date.
A continuing take from the ADP data is that small and medium size business continue to be the employment driver.
Econintersect believes the simplistic sampling extrapolation technique of ADP yields a far better picture of the employment situation in real time than Bureau of Labor Statistics (BLS) methodology. Although the BLS employment numbers eventually are correct, their data gathering technique does not support the quick release schedule.
Historically employment is the confirmation that real economic growth is occurring. As background, many economic factors impact jobs growth. How many jobs businesses create in any one month is not directly dependent on these economic factors, but on individual decisions. The impact of all the economic factors is averaged out over many months.
In our October 2011 economic forecast, we estimated non-farm payroll growth at 145,000, and the consensus estimate was for a jobs growth of 50,000.
Because of the differences in methodology, many pundits ignore the ADP numbers. Although there can be a low correlation in a particular month, the different methodologies tend to balance out, and the correlations are excellent outside of the data turning points. We are now 17 months past the post recession turning point in employment.
This Friday we will see the BLS August employment report.
Outplacement agency Challenger, Gray & Christmas, Inc. through John A. Challenger, chief executive officer stated:
“It would be easy to look at the September job-cut figure alongside some of the other less-than-stellar economic news that has been reported lately and draw the conclusion that the economy is indeed headed for a double dip. However, it is important to keep in mind that 80,000 cuts, or nearly 70 percent of last month’s total, came from just two organizations: Bank of America and the United States Army.”
“Neither of these cuts is directly related to recent softness in the economy. The Bank of America cuts are the result of continued fallout from the housing market collapse and restructuring effort to remake the bank into a smaller, more nimble institution. The military cuts are the result of drawing down forces in two wars and cost-cutting efforts in all areas of the federal government.”
“That being said, both could definitely be a sign of more cuts to come. Bank of America is not the only bank still struggling in the wake of the housing collapse. And, the military cutbacks are probably just the tip of the iceberg when it comes to federal spending cuts and layoffs.”
“As officers, soldiers and even civilian personnel get displaced from the military, they face special challenges when making the transition to the traditional job market. Perhaps the biggest challenge is taking the often specialized skills and experience gained in the military and translating it to the private sector.”
“The other big obstacle is the fact that many of these individuals entered the military straight out of high school or college and the entire jobsearch process, from resume writing to interviewing strategy, is completely foreign to them. For these reasons, many former soldiers struggle to find their way in the job market.”
September is the fourth month in a row that 2011 has seen more job cuts than the corresponding month a year earlier.