ADP (the largest payroll provider in the USA) said USA non-farm private payrolls grew 110,000 in October 2011 – not recessionary but not large enough to be called good growth. Manufacturing employment contracted.
Outplacement agency Challenger, Gray & Christmas, Inc. reported better layoff picture than last month – but still October is the fifth month in a row that 2011 has seen more job cuts than the corresponding month a year earlier. 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). A continuing take from the ADP data is that small and medium size business continue to be the employment driver.
Overall, Econintersect continues to be concerned as employment growth remains well below the labor market population growth of 170,000 per month (based on a employment / population ratio of 64.4).
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.
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 between 100,000 and 130,000.
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 18 months past the post recession turning point in employment.
This Friday we will see the BLS October employment report.
Outplacement agency Challenger, Gray & Christmas, Inc. through John A. Challenger, chief executive officer stated:
“Job cuts in government and financial services dropped significantly last month, but the two sectors are not out of the woods, by any means. Most of the government cuts this year were at the state level. We have yet to see the full impact of mandated federal spending cuts. Anticipated cuts at the U.S. Post Office alone could result in more than 200,000 job cuts.”
“Meanwhile, the European debt crisis is wreaking havoc on Wall Street. Commercial banks and mortgage lenders are still unstable in the wake of the housing collapse. Home sales and prices have rebounded only slightly and the millions of homes in foreclosure are basically ticking time bombs sitting on the banks’ balance sheets.”
“We seem to be in a pattern of two or more consecutive months with low job-cut totals, followed by a sudden spike one month, typically resulting from a small number of large layoffs. But, this is not surprising in light of how slow and uneven this recovery has been. We will probably see more of the same through the first half of 2012.”