There were a few important reports on the U.S. economy released this morning. First, data from Challenger, Gray & Christmas showed that the total number of announced corporate layoffs in America fell by 12 percent in November to 26,936. That was 13 percent below the pace of layoffs seen in November 2015 and the 2nd-lowest monthly total for job cuts since June 2000. Moreover, there have been 493,288 corporate layoffs announced so far in 2016, 5.5 percent fewer compared to the first eleven months of 2015 and likely a reflection of the continued improvement in both the labor market and the overall U.S. economy. Most of the job cuts announced this year have also been concentrated in only a few sectors, particularly energy and technology. John A. Challenger, chief executive officer of Challenger, Gray & Christmas, added that “Despite a few notable exceptions … most industries have seen job cuts decline in 2016. … Barring an unlikely December surge in downsizing, the year-end job cut total should remain well below the 598,510 layoffs announced last year. Even if the new administration creates some uncertainty among corporate forecasters, most employers are in a strong enough position and to take a wait-and-see approach when planning for next year.” While declining corporate layoff announcements are encouraging, a broader measure of job cuts has deteriorated recently. Indeed, the number of Americans making first-time claims for unemployment benefits jumped by 35,000 over the past two weeks to the highest reading since June. Although, initial claims are still near historic lows, the recent spike may cause some analysts to lower their estimates for nonfarm payrolls growth last month. We will know for certain after tomorrow morning’s release of the November job report from the Bureau of Labor Statistics (BLS).
Next, the manufacturing purchasing managers' index (PMI) from IHS Markit ended November at 54.1, a better-than-expected improvement from October’s 53.4 print and the best headline reading recorded in more than a year. Under the hood, output rose at the fastest pace in twenty months, and total employment increased due to renewed pressures on operating capacity. Some firms also cited “more confidence regarding the business outlook” as a factor behind their greater staff recruitment in November. Chris Williamson, chief business economist at IHS Markit, added that “The stronger dollar is hurting exporters, but the flip-side of the exchange rate appreciation is lower import costs, which have in turn helped to ameliorate the impact of rising global commodity prices compared to other countries.” Similarly, the Institute for Supply Management (ISM) manufacturing index, also released this morning, lifted to 53.2 in November, better than expected and the highest reading since June. Measures of new orders, production, and order backlogs all improved last month but total employment and foreign trade deteriorated, albeit slightly. Comments from surveyed managers were generally positive.
Elsewhere, data from the U.S. Census Bureau showed that construction spending in America grew at an adjusted annual rate of $1,172.6 billion in October (lagged release). That was an increase of 0.5 percent from September’s upward-revised print but slightly worse than the 0.6 percent gain economists had anticipated. October’s rise was the first monthly improvement in total construction spending since June and enough to lift the annual rate of growth to 3.4 percent, the fastest pace since April. Much of the headline gain in October was due to strong residential construction spending and an uptick in infrastructure investment that more than offset the weakness in the private sector. However, year-over-year growth in the public sector remained negative in October.
Sources: Econoday, Bloomberg, Twitter, ZH, Challenger, Gray & Christmas, U.S. DoL, IHS Markit, ISM, U.S. Census Bureau, FRBSLPost author: Charles Couch