There were a few important reports on the U.S. economy released this morning. First, 37,202 corporate layoffs were announced in America last month, according to new data from Challenger, Gray & Christmas. That is an 18.0 percent increase from May and 19.6 percent higher compared to this same period last year. However, a sub-40K layoff reading is still near the low-end of the historical range, and there have already been four months this year with job cut totals under 40,000. John Challenger, chief executive officer of Challenger, Gray & Christmas, added that “in a tight labor market, it’s no surprise employers are hanging on to their current workforces,” but also cautioned that “in the wake of announced tariffs, we may be entering a period of increased cuts going forward.” The latter could be a problem since consumer products manufacturers, also impacted by a potential trade war, have already announced 18,417 layoffs 2018-to-date, well above the 4,640 job cuts announced during the first half of 2017.
Next, private-sector payrolls in America rose by 177K in June, according to a new report from ADP, a smaller increase than expected. The May gain was revised higher but the less volatile 3-month average pace of job creation still fell to 179K in June, the lowest reading since last November, albeit well above the rate of job creation needed to keep up with population growth. Under the hood, most of the private-sector payrolls added last month were as usual found in the services sector (+148K), but the goods-producing sector also posted a solid 29K gain. As for small business hiring, payrolls at firms with 1-49 employees rose by only 29K in June. That continues the trend of slowing job creation among smaller firms that has been going on for the past few years, and businesses with fewer than 50 workers accounted for just 16 percent of last month’s total payrolls gain. Such weakness could be related to the difficulty small companies face when competing with large corporations for talent, a challenge that is made worse by the tightening labor market. Mark Zandi, chief economist of Moody’s Analytics, added that “Businesses’ number one problem is finding qualified workers. At the current pace of job growth, if sustained, this problem is set to get much worse. These labor shortages will only intensify across all industries and company sizes.”
Sources: Econoday, CG&C, ADP, FRBSLPost author: Charles Couch