ADP Publishes Painfully Low Employment Growth in April 2011

ADP, by far the largest payroll provider in the USA, says private non-farm payroll grew in the USA 179,000 in April 2011.  To put this number in perspective, job growth must exceed at least 150,000 just to keep even with population growth.  That leaves only 29,000 jobs’ growth above the equilibrium level needed for meeting population growth.

From the April 1 Employment Situation Report, the there were approximately 16 million unemployed, 13.5 million officially unemployed plus 2.4 million marginally attached to the work force in March.  There may be addtional potential workers that would be employed were the jobs available, but let’s just consider the 16 million.   In addition there are 8.4 million employed part-time for economic reasons, i.e. involuntary part-time.  Note:  These numbers will be revised Friday with the next Employment Situation Report for April.

At the rate of 29,000 per month, full employment will occur in the year 2056.  Of course, absolute full employment (nobody unemployed) is not an achievable, or even desirable, eventuality.  A healthy economy is one that has an unemployment rate 4-5% (+/-) and so achieving a situation with 8 million unemployed might be a better benchmark to consider.  The current 29,000 per month number would reach that “full” employment objective by 2034.  To put a dent in the 8.4 million working part-time for economic reasons, many of whom would prefer to work full-time, would require additional jobs.  The 2034 estimate could be extended by several more years if some of the involuntary part-timers convert to full time.

This discussion is not meant to be a prdiction of how long employment recovery may actually take.  It is presented for the purpose of showing just how weak 179,000 jobs gained in one month actually is.

The following data is from the April 2011 ADP Report:

It is easy to see the declining trend line.  This should be a temporary phenomenon.  In our April 2011 Economic Forecast, we pointed out that the employment dynamics were entering a lull phase.  The jobs graphic from this forecast:

In the above graph, the red line (the calculated economic pressure which produces jobs) is dipping.  Admittedly, forecasting actual jobs growth is effected by the whims of business and reporting / measurement errors – so exactness is impossible.  However, this is likely a transitory effect; our long term forecast is a return to the higher growths seen earlier this year.

Because of the differences in methodology, many pundits ignore the ADP numbers – while waiting for the BLS numbers released later this week.  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 15 months past the post recession turning point in employment.

Econintersect follows the jobs overview by global outplacement firm Challenger, Gray & Christmas, Inc.  Their press release for April employment:

The slow pace of downsizing continued in April, as employers announced plans to cut 36,490 jobs from their payrolls during the month, 12 percent fewer than the 41,528 job cuts announced the previous month, according to the latest report on planned layoffs released Wednesday by global outplacement firm Challenger, Gray & Christmas, Inc.

The April job-cut total was down 5.0 percent from the same month a year ago, when 38,326 planned layoffs were announced. It was the lowest monthly total of the year and the third lowest over the last 16 months. Year-to-date, employers announced 167,239 job cuts, 24 percent fewer than the 219,509 layoffs by the same point last year.

Not only have layoffs declined, but hiring is on the rise. So far this year, employers announced plans to add 172,590 new workers, an increase of 149 percent over same period in 2010 (69,329). April hiring was dominated by the McDonald’s restaurant chain, which announced a bold plan to add 50,000 employees in one day.

“The slow pace of downsizing suggests employers remain optimistic about business conditions going forward, despite higher energy costs, government deficits and slipping confidence among consumers. The optimism is evident not only in the lower job-cut figures, but also in announced hiring plans, which have outpaced layoffs through April,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas.

“It is important to realize that our hiring figures represent just a fraction of the job creation that is actually occurring, since most employers do not publicly announce hiring intentions. Of course, the weak link in the job market right now is the government sector, which continues to shed employees at a heavy rate,” Challenger noted.

The government sector announced 10,731 job cuts last month, bringing the four-month total to 52,660. The next largest job-cut total comes from the retail sector, which has announced 18,668 layoffs so far this year, including 2,900 in April.

“The good news is that government job cuts are down 32 percent from a year ago.  However, there is little cause for optimism, considering that conditions are not improving the struggling sector. Most of cuts tracked this year were concentrated in the state and local agencies. We have yet to see the impact of massive cost cutting at the federal level, but a surge in federal job cuts is inevitable,” noted Challenger.

According to the latest government report on the nation’s gross domestic product, federal spending was down 7.9 percent, the largest decline in more than a decade. Federal cutbacks are likely behind increased job cuts in the aerospace and defense sector, where layoffs surged more than 200 percent from 3,838 in the first four months of 2010 to 11,792 this year.

Putting all the information and data in perspective, there remains a positive employment dynamic.  Like all dynamics, there are fluctuations.  April 2011 is probably a low point in these employment dynamics.

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