Posts Tagged ‘manufacturing’

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.”

As Spring Arrives, Companies Are Hiring Again

Monday, March 21st, 2011

January’s big snowstorms on the East Coast contributed to the creation of just 63,000 jobs nationally in that month.  In February, however, businesses started to hire workers. The economy added 192,000 jobs, the best showing since May of last year, the Bureau of Labor Statistics reported Friday.  The unemployment rate – which is politically important — fell from nine percent to 8.9 percent.  Economists said the employment numbers were “solid” but not “ebullient.”

The optimistic view is that the economy has at long last turned the corner.  “I think the economy has not only turned the corner: I am expecting the employment gains to accelerate slightly,” said Sung Won Sohn, a professor of finance at California State University, Channel Islands.  “We have definitely reached the point where the economy is self-sustaining.”  Sohn thinks that the Federal Reserve can halt its monetary stimulus program for the economy.  “There is a growing possibility they will cut short their bond-buying program before the end of June,” he said.  Improved job growth would also help cut the federal budget deficit, since income-tax revenues would rise and requests for unemployment benefits will be reduced.  States and cities would get a boost for the same reasons.  “The chances are the revenue projections may be slightly better than the government anticipates,” according to Sohn.

Other economists were not as sanguine about the pace of recovery.  “If we see 200,000 jobs added in March, April, and May, that will convince market participants that the recovery is self-sustaining,” said John Canally, economist at LPL Financial in Boston.  “You can’t make that call just by looking at February, because the numbers may have been distorted by the weather.”  According to Canally, the most accurate indications of how the weather affected the numbers were in construction, which gained 22,000 jobs in February after falling 33,000 in January; transportation, which added 22,000 jobs compared with losing 44,000 in January; and leisure and hospitality, which added 21,000 jobs after dropping 3,000 the previous month.  “All of those swings are because of the weather,” he said.

Manufacturing added 33,000 jobs in February, primarily in producing durable goods such as washing machines and refrigerators.  This comes as no surprise to Frank Fantozzi, president of Planned Financial Services in Cleveland.  “In talking to our corporate clients, we were hearing there was definitely hiring going on and activity improving,” Fantozzi said.  “My litmus test is when our corporate clients from manufacturing to services send me e-mails saying they are looking to hire someone and asking if we have anyone in our network who would qualify.”

Not surprisingly, the Obama administration was cheered by the February numbers.  “We are seeing signs the initiatives put in place by this Administration – such as the payroll tax cut and the investment tax credit – are creating the conditions for sustained growth and job creation,” said Austan Goolsbee, chairman of the Council of Economic Advisers.  Republicans countered, suggesting that the improvement was because they had convinced the Obama administration to extend the Bush-era tax cuts for two years.  “Removing the uncertainty caused by those looming tax hikes provided much-needed relief for private-sector job creators in America,” said House Speaker John Boehner (R-OH).

According to Esmael Adibi, an economist at Chapman University in California, “Three sectors – construction, financial activities and government – are taking the oomph out of the recovery.  Job creation is what is going to bring housing back, but with this pace of job creation, we’re not going to see a quick turnaround.”

Half of Companies Plan to Hire New Employees in 2011

Tuesday, December 28th, 2010

Half of Companies Plan to Hire New Employees in 2011Approximately half – 47 percent – of American companies whose sales range from $25 million to $2 billion say they will hire more employees in 2011, according to a Bank of America survey of chief financial officers (CFOs).  The new number represents a significant uptick over the 28 percent who planned to hire new employees one year ago.  The news is not all good – 61 percent of companies who do not plan to hire said there is still reduced demand for their products or services.  The survey of 800 firms covered a broad range of industries throughout the United States.

The CFOs are unsure that the economic recovery will last, as well as being concerned about the impact of the healthcare reform law that Congress passed in March of 2010.  Their caution is evident in the fact that – on a scale of one to 100 – the CFOs gave the economy a rank of 47.  This represents a slight increase over the 44 level recorded last year.  An addition 64 percent expect their companies’ revenue will grow in 2011; 55 percent anticipate margin growth.

Despite the challenging economic climate, many CFOs have growing confidence that their companies have weathered the worst of the storm and are poised for expansion,” Laura Whitley, Bank of America’s global commercial products executive, said.  “Although concerns about the economy remain, the increase in CFOs who expect to hire employees could be crucial to improving the nation’s unemployment rate.  It’s exciting to see a more positive mood.”  Yet, she noted, the recovery has been slower than expected.  “When talking with businesses we hear it all the time.”

Wheels of Manufacturing Restarting

Monday, January 11th, 2010

ISM Manufacturing Index shows better-than-expected performance.  Manufacturing is gradually on the upswing, according to the December ISM Manufacturing Index, which rose to 55.9 from November’s 53.6 reading.  A gain to just 54.3 was expected, so the news is encouraging.  In terms of inflation, prices paid climbed to 61.5; an increase to 57.2 was forecast.  This is great news for a sector that saw both the steepest declines in manufacturing and trade inventories since 1949 and the fall of industrial production since 1946.

According to the ISM report, “At 55.9 for December, the index not only surpassed expectations of a rise to 54.3, but also posted its strongest reading since April, 2006.  The gains in the components were broad-based with new orders rising to 65.5 in December from 60.3 in November, marking its strongest reading since December, 2004.  Production rose to 61.8 from November’s 59.9, while the employment component increased to 52.0 from the prior month’s 50.8, marking the third consecutive month in expansionary territory.  We expect the Fed to help both sustain the recovery and heal labor markets by leaving the Fed Funds rate at its current low level until the final quarter of 2010.”

Manufacturing Firing Up the Engines Again

Thursday, December 10th, 2009

Manufacturers are feeling sunnier, according to a new Price Waterhouse Coopers poll. The poll, which queried senior executives at 60 industrial manufacturers between mid-July and mid-October, found that 48 percent sense optimism about the American market compared with last year an improvement over the second quarter.  In light of this cautious optimism, 23 percent expect their businesses to regain strength before June, although another 45 percent believe their businesses will not improve until the second half of 2010.

In the same vein, a report from the Institute for Supply Management (ISM) indicated increases in several of its manufacturing indices, which suggest that industrial property owners might soon see a demand for space.  During the same timeframe, the Department of Commerce reported a one percent increase in bookings for durable goods during September.  This represented the first increase in the GDP since the second quarter of 2008.

A significant finding is that the number of companies anticipating growth in revenue over the next year recorded an even larger increase compared with the second quarter, with 57 percent responding positively in the third quarter.  Only 25 percent plan to hire new employees in the next year, and 37 percent plan to make capital investments.

ISM notes that October is the third consecutive month of manufacturing growth.  The most promising change reported by ISM is a surge in the production index, which rose 7.6 points to 63.3 percent during the third quarter.