There were a few important reports on the U.S. labor market released this morning. First, private sector payrolls rose by 179K in November, according to ADP. That was the smallest gain since August but still better than expected and the 3-month average climbed to 204K, an 8-month high. At first glance the headline slowdown in job creation might seem discouraging but for now it is more likely just a natural side-effect of a tight labor market where businesses want to add staff but have a challenge filling vacancies. Mark Zandi, chief economist of Moody’s Analytics, added that “Job growth is strong, but has likely peaked. This month’s report is free of significant weather effects and suggests slowing underlying job creation. With very tight labor markets, and record unfilled positions, businesses will have an increasingly tough time adding to payrolls.” It is also worth noting that small- and medium-sized businesses accounted for 92.5 percent of all the private-sector payrolls added to the economy last month. That is the highest reading since April 2017 and suggests that these companies’ low exposure to foreign demand and tariffs, relative to large enterprises, has helped shelter them from the trade war.
Elsewhere, there were 53,073 corporate layoffs announced in America last month, according to a new report from Challenger, Gray & Christmas. That was a 29.8 percent decrease from October, but 51.5 percent higher compared to this same period last year. The monthly data can be quite volatile, and November’s total was exacerbated by an announcement from General Motors that 14,000 workers would be let go in an effort to cut costs. Andrew Challenger, vice president of Challenger, Gray & Christmas, added that “Announcements like GM’s will not be the last, as companies adapt to shifting consumer behavior. We've already seen major plans in the U.S. from Verizon, Wells Fargo, and Toys R Us for exactly those reasons.” Further, 494,775 job cuts have been announced year-to-date, 28.1 percent higher compared to the first 11 months of 2017, and the highest 11-month total since 2015. Although this could be indicative of a potential economic shift, it is still too early to be certain, especially since this data tracks mainly large multinational corporations that are more sensitive to trade disputes. A better confirmation will come from initial jobless claims, which tend to spike ahead of a recession. Moreover, this leading economic indicator has risen to a 6-month high recently but overall is still only slightly above the half-century low hit earlier this year. Mr. Challenger added that “The job market remains strong for the moment. … The tight labor market and high demand for skilled workers mean most of those who find themselves unemployed have a good chance of finding new positions.”
Sources: Econoday, ADP, U.S. DoL, Challenger, Gray & Christmas
Post author: Charles Couch