There were several important reports on the U.S. economy released this morning. First, data from ADP showed that business hiring firmed last month, with 172K private-sector payrolls being added to the economy in June. This was well above economists’ expectations but the May gain was revised lower by 5K payrolls. The smoother (less volatile) 3-month average of ADP’s hiring estimates as a result slid to 163K in June, the lowest reading in three years but still signaling a relatively healthy overall pace of job creation. Elsewhere in the report, small businesses were again found to be the main driver of private-sector job growth in America as firms with 1-49 employees added 95K workers in June, the best monthly increase since last December and more than the gains from large- and medium-sized businesses in June combined. All the private-sector jobs added last month were in the services sector (+208K), which included large gains in the "professional and business" and “transportation and utilities” arenas. Payrolls in the goods-producing sector fell by 36K in June, including 21K lost manufacturing jobs. Mark Zandi, chief economist of Moody’s Analytics, added that “Job growth revived last month from its spring slump. Job growth remains healthy except in the energy and trade-sensitive manufacturing sectors. Large multinationals are struggling a bit, and Brexit won’t help, but small- and mid-sized companies continue to add strongly to payrolls.”
Next, a report from Challenger, Gray & Christmas showed that the number of announced job cuts in America lifted by 28 percent to 38,536 in June. This increase followed the 5-month low hit in May and was still 26 percent below the average number of monthly job cuts announced over the past year (53,049). Planned layoffs were also 14 percent lower in June compared to this same period last year but the total number of job cuts announced during the first half of 2016 (313,754) was 9 percent higher versus the first six months of 2015. The pace of job cutting, though, has slowed markedly over the past three months, with total planned layoffs announced in the second quarter of 2016 down 27 percent from the first quarter, and 10 percent lower compared to Q2 2015. A major factor behind this is the sharp rebound in the price of oil because energy sector layoffs fell by 42 percent in the second quarter, and oil-specific job cuts declined by 48 percent. However, announced layoffs also fell significantly in the retail (-48 percent) and health care (-65 percent) sectors during the second quarter. John A. Challenger, chief executive officer of Challenger, Gray & Christmas, added that “We may continue to see low job cut totals throughout the remainder of 2016, as employers take a wait-and-see stance on workforce levels. Several uncertainties, including national elections, the recent Brexit, and global security and economic issues are giving employers pause when it comes to workforce decisions. We are seeing it in layoff numbers, as well as the job creation numbers, which have been lackluster in recent months.”
Somewhat related is new data from the U.S. Department of Labor which showed that seasonally adjusted initial jobless claims totaled 254K in the week ending July 2nd, a decrease of 16K from the prior week’s figure, significantly better than economists had expected, and the lowest headline claims reading since the multi-decade low hit in April. The number of Americans filing for jobless benefits has fallen considerably over the past month back toward historic levels. Many analysts are hopeful that this means May’s sharp slowdown in nonfarm payroll growth was only temporary, and we will find out if this is actually the case after tomorrow’s release of the June job report from the Bureau of Labor Statistics (BLS). Regardless, this was still the 70thconsecutive weekly initial claims reading below 300K, one of the longest such strings on record and a pattern believed to be consistent with an overall healthy labor market.
Sources: Econoday, Twitter, Bloomberg, ZH, Challenger, Gray & Christmas, U.S. DoL, FRBSLPost author: Charles Couch