There were several important reports on the U.S. economy released this morning. First, data from ADP showed that business hiring rebounded slightly last month, with 173K private-sector payrolls being added to the economy in May. This was in line with economists’ expectations and the April figure was revised higher by 10K payrolls. The smoother 3-month average of ADP’s hiring estimates slid to 180K in May, the lowest reading since last November but still a healthy overall pace of job creation. Elsewhere in the report, small businesses were again the main driver of private-sector job growth in America as firms with 1-49 employees added 76K workers in May, down from April but clearly a greater demand for workers than what was seen at larger firms. Almost all the private-sector jobs added in May were in the services sector (175K), which included large gains in the "professional and business" and “transportation and utilities” arenas. There were 13K construction payrolls added last month but 3K jobs lost in the manufacturing sector. Ahu Yildirmaz, VP and head of the ADP Research Institute, added that “Job creation appears to have slowed as we move further into 2016. Challenging global conditions affecting hiring at large companies and a tightening labor market for skilled workers are among the factors that may be contributing to the slowdown.”
Next, a report from Challenger, Gray & Christmas showed that the number of announced job cuts in America plunged by roughly 53 percent to 30,157 in May. This was the lowest reading for planned layoffs since last December and 27 percent below the May 2015 total. Year-to-date, though, U.S. businesses have announced 275,218 workforce reductions, 13 percent more than during the first five months of 2015. Most of the uptick in planned job cuts has been due to the energy sector because even though oil has rebounded significantly in recent months, the price per barrel is still low enough to continue to weigh on profits for firms in this arena. Altogether, employers in the energy sector announced another 7,572 job cuts in May, bringing the 2016-to-date total to 75,232, up 25 percent compared to this same period last year. However, John A. Challenger, chief executive officer of Challenger, Gray & Christmas, added that “May could be the start of a summer slowdown in the pace of job cutting as companies take a pause following the period of heavy downsizing that started the year. In general, oil prices have improved somewhat since the beginning of the year, though they are still less than half of what they were at oil’s recent peak. However, the recent gains may be enough to at least temporarily slow job cuts in the sector.”
Somewhat related is the latest data from the U.S. Department of Labor which showed that seasonally adjusted initial jobless claims totaled 267K in the week ending May 28, a decrease of 1K from the prior week’s figure and in line with economists’ expectations. This was the third week-over-week decline in a row for jobless claims following the spike to a roughly 15-month high at the beginning of May. Some analysts believe this recent pattern is a signal that the labor market rebounded somewhat last month from a particularly weak April but we will not know for sure until tomorrow’s release of the May job report from the Bureau of Labor Statistics (BLS). Regardless, this was still the 65th consecutive weekly initial claims reading below 300K, a string that is even better than what was seen during the late ‘90s economic expansion which had a smaller overall labor force.
Sources: Econoday, Twitter, Bloomberg, ZH, Challenger, Gray & Christmas, U.S. DoL, FRBSLPost author: Charles Couch