There are several important reports on the U.S. economy worth mentioning this morning. First, 76,835 corporate layoffs were announced in America in February, according to data from Challenger, Gray & Christmas. That was a 45 percent jump from January and the highest monthly print since July 2015. The retail sector remains the main driver of recent layoff announcements and is already responsible for 41,201 job cuts in the first two months of 2019. That is 92 percent higher compared to the total retail cuts announced through February of last year and the largest January-February total since 2009. This trend may not be reversing anytime soon as bankruptcies and restructurings at brick-and-mortar establishments continue to rise due to shifting consumer behavior, i.e. an online shopping preference. Job cuts have also picked up a bit in the industrial goods arena, which includes heavy and industrial manufacturers that are more sensitive to tariffs and general trade uncertainty.
Next, private sector payrolls rose by 183K in February, according to ADP. That was the smallest increase since November, but the January gain was revised sharply higher (213K to 300K). As a result, the less volatile 3-month average pace of private-sector job creation lifted to 244K, the best print since July of last year and well above what is needed to keep up with U.S. population changes. The report’s authors added that “The economy has throttled back and so too has job growth. The job slowdown is clearest in the retail and travel industries, and at smaller companies. Job gains are still strong, but they have likely seen their high watermark for this expansion.” Speaking of small business, payrolls at firms with 1-49 workers rose by just 12K in February. That was the smallest increase since September 2017 and hiring at these firms accounted for just 6 percent of all the private-sector payrolls added to the economy last month. Such weakness, though, comes after the best month for small business hiring in almost two years and may simply be related to delayed separations of extra workers brought on for the holiday shopping season. However, the longer-term growth trend in small business hiring has clearly been slowing and this highlights the difficulty these firms are having when competing with larger companies in a tight labor market where workers expect improving wages and benefits.
Elsewhere, nonfarm business sector labor productivity rose by 1.9 percent during the fourth quarter of 2018, according to a report from the Bureau of Labor Statistics. That was a slight increase from Q3’s downward-revised gain and better than expected. Productivity rose in all four quarters last year, likely helped by companies using recent tax savings to increase capital spending and reinvest in their businesses in the forms of new equipment, technology, and employee training. Continued trade policy uncertainty, though, has already caused some firms to scale back their investment plans, an unneeded headwind just as productivity growth is showing signs of finally breaking out of a multi-year downtrend. This is especially true since longer-term productivity obstacles in America remain, such as aging demographics. Indeed, older (more-experienced) workers retiring could drag on output per hour, and those still in the workforce may be less motivated to learn new technologies and skills at this stage in life.
Sources: Econoday, Challenger, Gray & Christmas, ADP, U.S. DoL, FRBSL
Post author: Charles Couch