There were two important reports on the U.S. economy released this morning. First, data from Challenger, Gray & Christmas showed that 44,653 corporate layoffs were announced in America last month. That is a 37.7 percent jump from December but not too surprising since many firms in January typically start letting go of the additional (temporary) workers brought on ahead of the holiday shopping season. Moreover, the retail sector accounted for roughly one in every three job cuts announced last month. Compared to January 2017, though, layoff announcements in general are much lower this year, which John Challenger, chief executive officer of Challenger, Gray & Christmas, attributes to the many companies that are “enjoying relative financial health and a strong economy.” Mr. Challenger added that “It remains to be seen what impact the passage of tax legislation will have on companies’ staffing plans. We’ve seen a number of companies announce one-time bonuses or a raise to their minimum wages. Other companies are planning new investments, and several have pledged new jobs.”
Elsewhere, a report from the Bureau of Labor Statistics (BLS) showed that nonfarm business sector labor productivity declined by 0.1 percent during the fourth quarter of 2017, as output (+3.2 percent) increased slower than hours worked (+3.3 percent). That is significantly worse than the 1.1 percent gain economists had anticipated and the first quarterly drop in productivity since Q1 2016. The Q3 2017 figure was also revised lower, although it was still the best quarter for productivity growth since 2015, highlighting how volatile this metric can be in the short-term. Regardless, productivity growth in America remains below the average seen during past business cycles, which is discouraging because outgoing Federal Reserve Chair Janet Yellen described productivity growth as the “most important factor determining continued advances in living standards.” Incoming Fed Chair Jerome Powell has similarly said that “labor force participation and productivity gains are key to lifting the sustainable rate of expansion in the world’s largest economy.” Muted business investment has been a major drag on productivity growth in recent years, as companies have relied more heavily on boosting staff sizes to meet increased customer demand rather than investing in technology and education to increase efficiency. On the bright side, the recent tax package passed in Congress was aimed in part at incentivizing capital spending, which could help lift productivity.
Sources: Econoday, U.S. DoL, Bloomberg, Challenger, Gray & ChristmasPost author: Charles Couch