Posts Tagged ‘layoffs’

Job Creation Strengthens, But Unemployment Increases?

Wednesday, January 11th, 2012

American companies added 244,000 jobs to the economy in April, the fastest pace in five years.  In an ironic twist, however, the unemployment rate climbed to nine percent, according to the Department of Labor.  The unemployment rate fell to 8.8 percent in March after dropping continuously since November’s rate of 9.8 percent rate. Economists had predicted that just 186,000 jobs would be added, so the numbers show that the economy is gaining strength.  “What we’re seeing is a sustained pick-up in hiring and it suggests that businesses have gained enough confidence to look past short-term fluctuations in demand,” said Aaron Smith, a senior economist at Moody’s Analytics.

“Headwinds remain, but not enough to derail the recovery or set us back momentarily,” said Diane Swonk, chief economist at Mesirow Financial in Chicago, although she remains cautious about the outlook.  According to Swonk, the increase in new unemployment claims were reported in the weeks after the April jobs surveys.  Job losses in the public sector could intensify, with more teachers getting laid off as the school year ends and local governments deal with budget shortfalls.

The number of officially unemployed Americans totaled 13.75 million in April, an increase over the 205,000 reported in March, according to the Labor Department.  “At this point, coming out of a recession this deep, we should be getting unambiguously huge growth, of 300,000 to 400,000 (new jobs) a month,” said Heidi Shierholz, a labor economist at the Economic Policy Institute.  “And it’s just nowhere near that.  We’re still in a rocky place.”

April’s job growth was in multiple sectors.  For example, the retail industry added 57,100, approximately half at general merchandise stores.  Manufacturing added 29,000 more workers in April.  Since December 2009, factory payrolls have risen by 250,000, according to the Labor Department.  Business and professional services, whose wages tend to be higher than average, grew by 51,000, with consulting businesses, computer services and architectural firms experiencing growth.  Educational and health services, and the leisure industry, each also added nearly as many jobs.  Even the construction industry saw a small gain in April.  Government was the sole employment group that declined; its payrolls contracted by 24,000, primarily due to cuts at state and public agencies.

According to Austan Goolsbee, Chairman of the White House Council of Economic Advisers, “The last three months we’ve added more than a quarter million jobs, on average, every month.  That’s very heartening and the fact that it was, really, across a whole lot of industries.”

According to Heather Boushey, an economist at the Center for American Progress, a non-profit think tank in Washington, D.C., “We need to see job growth break above 300,000 a month and stay at that level for many months before the unemployment rate will begin to come back down.  Today’s report provides a number of data points that point toward caution in interpreting the data positively in anticipation of that level of jobs growth returning anytime soon.  The average hours worked for production and nonsupervisory employees was 33.6 hours per week in April, the same as in March.  This remains below the 2000s recovery peak of 33.9 hours per week, and far below the late 1990s peak of 34.6 hours per week.  At the same time, employers shed 2,300 temporary workers, which either means they are hiring permanent employees or they are no longer seeing an increase in demand.

July Jobs Numbers Disappoint

Monday, October 3rd, 2011

ADP, a leading payroll services company, is reporting that private companies added 114,000 jobs in July.  Many analysts had projected an increase in hiring from June, but it is not likely that the unemployment rate will decline even if job growth rose sharply.  ADP’s forecasts are frequently used to measure how the labor economy is performing, but the firm has had its share of missteps, with some estimates on target and others varying sharply from actual government-issued data.  In June, ADP projected that more than 140,000 jobs were added.  The official government report showed that the labor economy had experienced anemic growth during the month, with a net total of only 18,000 jobs created.  Many economists and industry believe that private employers likely added more jobs than previously projected during July.

Not all the news was good, however. Employers announced 66,414 planned layoffs in July, an increase of 60.3 percent over the 41,432 announced in June, according to a report from consultants Challenger, Gray & Christmas, Inc.

Any gain or loss in jobs above 100,000 is considered statistically noteworthy by economists.  Expectations were rather low, however, given the recent bad news about GDP, consumer spending and manufacturing recently.  “We still expect that actual payrolls may have risen by around 50,000 in July,” according to Capital Economics.  “That would be better than the previous two months, but hardly reason for cheer.”  “This pace of job creation usually implies a steady unemployment rate,” according to ADP’s employment report.  Capital Economics said that the latest job gains would not reduce the unemployment rate.  “We are in a process of discovery over whether the slowdown we have seen since March in the U.S. is over and we are entering a new phase of faster growth or that we are in a slump,” said Francisco Torralba, economist at Morningstar Investment Management.

Recently released Institute of Supply Management (ISM) numbers indicate an economy that continues to move barely at a snail’s pace.  The non-manufacturing ISM report showed expanding business activity, new orders and employment, but at a slowing pace.  Planned layoffs reached a 16-month high while the private sector added 114,000 jobs in June, most of them in the small business and the services sector.  “Today’s report shows modest job creation for the month of July at a rate of half what is needed for meaningful employment and economic recovery,” said Gary C. Butler, Chief Executive Officer of ADP. Approximately half of June’s private sector job additions came from small business, which added 58,000 employees, and medium businesses (+47,000).  These statistics mesh with the Challenger, Gray & Christmas job-cuts report, which showed planned layoffs hitting a 16-month high on a “sudden and unexpected burst” in downsizing by large companies.  Merck, Borders, Cisco, Lockheed Martin, and Boston Scientific announced plans to cut 38,000 jobs in July, 58 percent of the 66,414 announced.   According to Dave Rosenberg, who is viewed by many as a perma-bear, it will be really hard for a self-sustaining recovery to pick up.  “The overhang of excessive debt burdens is still with us today and the problem with the government stimulus programs that were put into place is that they were not designed properly; the multiplier impacts never did kick in,” said Rosenberg. “So we can’t ‘grow’ our way out.  Now government sectors in nearly every jurisdiction are tightening their fiscal belts.  Companies and banks retain their extreme stash of cash, if we dare suggest, because they see the economic environment that we do and want to survive the next downturn.”

In the meantime, 400,000 Americans filed for first time unemployment claims in the last week of July, according to the Department of Labor.  Coupled with a revision of initial claims in the previous week to 401,000, the latest update means claims have yet to dip below the 400,000 mark for 17 weeks.

Writing for The Hill, Vicki Needham says that “Economists say these figures are in line with the economy’s slowing expansion and are expecting growth to accelerate through the second half of the year as temporary factors such as high gas prices fade.  While companies aren’t hiring, consumers are being cautious with their money, spending less for the first time in 20 months.  Consumer spending rose only 0.1 percent in the 2nd quarter and households tucked away more savings.”

Threats To the Economy Averted

Tuesday, October 19th, 2010

Good news for the economy!  Deflation is unlikely and jobless claims are shrinking.  Two significant threats to the economy are receding, although the recovery still has a long way to go. One of the threats was the specter of deflation – which has not occurred since the 1930s – now belied by the 0.3 percent inflation rate reported for August, and driven primarily by rising food and energy prices, according to the Bureau of Labor Statistics. The second is that another round of mass layoffs looks unlikely now, given the third drop in jobless claims in four weeks.

First-time applications for unemployment benefits fell by 3,000 to a seasonally adjusted 450,000 recently, the lowest level in two months, according to the Department of Labor.  In Illinois, for example, the unemployment rate fell to 10.1 percent in August, the eighth straight month that the rate was steady or declined.

Chris Rupkey, an economist with Bank of Tokyo-Mitsubishi UFJ, described August’s spike in unemployment claims a “false alarm.  The labor markets are stable and companies are not increasing layoffs.”  David Resler, chief U.S. economist at Nomura Securities agrees, noting that the August spike likely resulted from temporary census jobs that came to an end.

Employees Are Saying “I Quit” Again

Monday, June 28th, 2010

Workers say “I quit”; a sign that the economy is improving.  Two short words are being heard in offices that have been absent for some time.  The words are:  “I quit.”   In the last three months, more Americans have quit their jobs than were laid off, a sharp contrast with the last few years that points to a gradually thawing jobs market. Although some of the quitters have accepted new jobs when they resign, others have no firm offers except for a new-found confidence that they will be able to find employment quickly.  “There is a century’s worth of evidence that bears out this view that quits rise and layoffs fall as the job market improves,” said Steven Davis, a University of Chicago economist.

Long-term trends point to a job market that can only improve.  Already this year, the economy has created a net 982,000 jobs following a recession that wiped out more than eight million jobs.  According to the federal government, the number of people who quit their jobs in April rose to nearly two million, the most in more than a year and a 12 percent increase over January.  Workers were afraid to quit during the darkest months of the recession, and with good reason.  Jobs were in short supply; others feared facing layoff because of the “last hired, first fired” principle.

Fear kept many people in their jobs, according to David Adams, vice president of training at Adecco, a national staffing firm, who says that his firm had trouble recruiting people for open jobs during the recession.  Now, Adams is seeing more people who have jobs looking to interview versus laid-off workers searching for employment.  “The hangover is over.  It’s really starting to move toward a market where the employee can have a lot more confidence making a move.”

Increased Worker Productivity Putting Brakes on New Hires

Wednesday, April 28th, 2010

Employee productivity is at an eight-year highWorker productivity increased 3.8 percent in 2009, the best record since 2002. Writing in the Washington Post, Neil Irwin notes, “That means high-level gains in productivity – which in the long run is the key to a higher standard of living but in the short run contributes to sky-high unemployment.  So long as employers can squeeze dramatically higher output from every worker, they won’t need to hire again despite the growing economy.”

Federal Reserve chairman Ben Bernanke called the increase in productivity “extraordinary” and admitted that he had not seen it coming.  “It is an episode that we’re going to – we, economists in general – are going to want to understand better and look at for a long time.”

Irwin wonders why companies didn’t achieve those gains when the economy was strong.  He believes the answer is with the employees themselves.  “Workers were in a panic of their own in 2009.  Fearful of losing their jobs, people seem to have become more willing to stretch themselves to the limit to get more done in any given hour of work.  And they have been tolerant of furloughs and cutbacks in hours, which in better times would drive them to find a new employer.”

James Manyika, a director at the McKinsey Global Institute, sees it this way:  “Companies are taking a fresh look at how to organize people, at how people actually work.”

Santa Claus Doesn’t Deliver Consumer Confidence

Tuesday, January 6th, 2009

Consumer confidence fell to an all-time low in December, despite the fact it was in the midst of the annual Christmas-shopping frenzy.  The reasons for this new low include deepening job insecurity, fast-deteriorating housing markets, and declining asset values. According to the Conference Board, the Consumer Confidence Index fell to 38 in December, compared with the 44.7 reported during November.  The Present Situation index, which measures respondents’ attitudes to business conditions and employment prospects, fell to 29.4 in December, compared with 42.3 in November.  That is close to the levels last seen during the 1990-1991 recession.

santa-claus-doesntWith the nation’s unemployment rate rising to 6.7 percent during November, the Board warns of more layoffs during the first six months of 2009.  Respondents to the Conference Board’s survey of 5,000 American households who believe that jobs are “hard to get” rose to 42 percent in December, from 37.1 percent during the previous month.

This consumer confidence extends to commercial real estate, where values are in a gray zone, awaiting the inevitable write downs and workouts that will attend a slow recovery.  Until this happens, many buyers and sellers feel in limbo.  The simple formula to fix this is:  somebody needs to get off the dime.  To quote a couple of clichés, nothing succeeds like success and no news isn’t always good news in a credit crunch.

Signs of Optimism Amid Battered Consumer Confidence

Monday, November 3rd, 2008

Layoffs and the promise of more to come, falling home prices and shrinking investment portfolios have created the highest level of consumer pessimism on record, says the Conference Board.  According to an online AP report, consumer confidence sank to just 38 in October, a significant drop from the rather rosy 61.4 reported in September. The Conference Board is a nonprofit business membership and research organization that is best known for its Consumer Confidence Index and the index of Leading Economic Indicators.  Its membership includes top executives and industry leaders from the world’s most respected corporations.  Consumer opinion is crucial because spending equals approximately 70 percent of all economic activity.

Despite the Conference Board’s report, good news does exist on the retail front.  Discount big-box stores are the bright spots, and Costco was the big winner.  The firm closed out its fiscal year on August 31, 2008, with sales up 13 percent compared with the previous year.  During September, Wal-Mart Stores, Inc., reported a 2.4 percent rise in sales as cash-strapped shoppers purchased food and medicine from the retailer.  Wal-Mart’s Sam’s Club warehouse division reported an increase of 4.6 percent.  The more upscale Target Corporation reported that its net retail sales during the five-week period ending October 4 increased by 2.5 percent.