Economy, Small Business

Economic Data Roundup (06/01/2017)

6/1/17 12:00 PM

iStock-618526794.jpgThere were lots of important reports on the U.S. economy released this morning. First, data from ADP showed that business hiring accelerated in America last month, as 253K private-sector payrolls were added to the economy in May. That was much better than the 170K increase economists had expected and the largest monthly gain since March. April’s figure was revised slightly lower but the less volatile 3-month average for ADP’s hiring estimate still rose in May to +227K, an overall healthy pace of job creation. Under the hood, most of the private-sector payrolls added last month were as usual found in the services sector (+205K), including large gains in the “professional & business” and “trade, transportation & utilities” arenas. However, payrolls in the goods-producing sector also experienced a large gain in May (+48K), the fourth monthly improvement in a row and helped by a 37K jump in construction hiring. Another highlight from the report is that small businesses continued to be a big driver of private-sector job creation in America, as firms with 1-49 employees added 83K payrolls last month, equating to a third of the headline employment gain. Mark Zandi, chief economist of Moody’s Analytics added that, “Job growth is rip-roaring. The current pace of job growth is nearly three times the rate necessary to absorb growth in the labor force. Increasingly, businesses’ number one challenge will be a shortage of labor.”


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Next, a report from Challenger, Gray & Christmas showed that 51,692 corporate layoffs were announced in America last month. That was a 41 percent jumped from April and 71 percent higher compared to this same period last year. However, roughly 40 percent of those layoffs were announced by Ford Motor Company, as the automotive giant sought to “streamline and cut costs” in response to consumers’ growing demand for “electric and self-driving options.” Even with that one-time jump in layoff announcements, total job cuts in America are still down 28 percent this year compared to the first five months of 2016. Job cuts are still occurring, though, and the retail sector is leading the way with 55,910 announced layoffs. That is due largely to the rising number of brick-and-mortar shops that are closing in response to increased competition from online merchants. John A. Challenger, chief executive officer of Challenger, Gray & Christmas, even added that “Grocery stores are no longer immune from online shopping. Meal delivery services and Amazon are competing with traditional grocers, and Amazon announced it is opening its first ever brick-and mortar store in Seattle. Amazon Go, which mixes online technology and the in-store experience, is something to keep an eye on since it may potentially change the grocery store shopping experience considerably.”

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Elsewhere, the manufacturing purchasing managers' index (PMI) from IHS Markit ended May at 52.7, the fourth monthly decline in a row following the nearly 2-year high hit in January. Under the hood, new business growth slowed to an 8-month low, and the gains seen in output and employment moderated. On the bright side, input price inflation eased sharply from April’s two-and-a-half-year peak, which IHS chief economist Chris Williamson said “should at least help take pressure off profit margins and also feed through to weaker pressure on consumer price inflation.” Somewhat more encouraging was the Institute for Supply Management's (ISM's) manufacturing index, also released this morning, which rose to 54.9 in May. That was better than anticipated but still well below the post-election high. Measures of new orders and employment improved in May but production and foreign trade softened. Comments from surveyed managers were generally positive last month. Overall, both manufacturing indices remain near cycle highs but the recent weakness shows that soft (survey) data continue to come back in line with hard data, thus providing more evidence that the post-election spike in business sentiment might have been a bit overdone given the lack of progress (policywise) in Washington.





Sources: Econoday, Bloomberg, ZH, Twitter, ADP, Challenger, Gray & Christmas, U.S. DoL, IHS Markit, ISM, U.S. Census Bureau, FRBSL

Post author: Charles Couch