There were several important reports on the U.S. economy released this morning. First, there were 43,884 corporate layoffs announced in America in December, according to data from Challenger, Gray & Christmas. That was the lowest monthly print since August but still 35.3 percent higher compared to this same period last year. Job cuts totaled 538,659 for all of 2018, a 28.6 percent increase from 2017 and the highest annual reading since 2015. Most of the announced layoffs last year were due to restructuring (185,931) and closings (145,298), with much of the damage occurring in the retail sector as brick-and-mortars continued to struggle with online competition (Amazon). However, the report’s authors added that “While retailers have made significant job cuts this year, the industry is also doing the bulk of hiring, albeit seasonally. It remains to be seen if retailers cut these jobs in the new year.”
Elsewhere, private-sector payrolls jumped by 271K in December, according to ADP. That was the largest gain since February 2017 and nearly 100K more jobs than expected. Seasonal hiring likely contributed to the strong December print, especially as small business employment surged by 89K last month, the largest increase in a year. Moreover, small businesses accounted for one out of every three private-sector payrolls added to the economy last month, another 1-year high. Even after adjusting for the holiday-related uptick, job growth in general remains quite healthy, with the less volatile 3-month average payrolls gain climbing to 222K in December, a 9-month high and well above the pace of job creation needed to keep up with population growth. Mark Zandi, chief economist of Moody’s Analytics, added that “Businesses continue to add aggressively to their payrolls despite the stock market slump and the trade war. Favorable December weather also helped lift the job market. At the current pace of job growth, low unemployment will get even lower.”
Finally, manufacturing activity in America expanded at a slower rate last month, according to two separate reports. First, the purchasing managers' manufacturing index (PMI) from IHS Markit slid to 53.8 in December, the lowest headline print since September 2017 and slightly worse than anticipated. The weakness was broad-based last month, with notable declines seen in new order growth, business confidence, and total employment. Although a disappointing way to end the year, almost every indicator remains at a reading above 50, which implies net expansion rather than contraction. Further, inflation pressures encouragingly cooled in December, new export business increased for the 5th month in a row, and several surveyed manufacturers said the softer employment numbers were mostly due to difficulties retaining talent in the tight labor market. Markit’s chief economist Chris Williamson, though, still cautioned that the survey “revealed signs of slower demand growth from customers, as well as rising concerns over the impact of tariffs.” Similarly, the Institute for Supply Management's manufacturing index ended December at 54.1, the lowest reading since November 2016 and much worse than expected. Under the hood, measures of new orders, production, and employment all deteriorated last month, and comments from surveyed manufacturers were generally negative. The weakness in these two national reports agrees with the cooling seen in the government’s regional data for December.
Sources: Econoday, CG&C, ADP, IHS Markit, ISM
Post author: Charles Couch