Last week I noted that given recent data on employment, we may see triple digit declines in US non-farm payrolls. The ADP employment report released today also suggested that could be the case. From adpemploymentreport.com.
Nonfarm private employment decreased 79,000 from May to June 2008 on a seasonally adjusted basis, according to the ADP National Employment Report. The estimated change in employment from April to May was revised down from an increase of 40,000 to an increase of 25,000.
This month’s decrease in employment was broad based across industrial sectors and suggests continued weakness in employment.
Employment in the service-providing sector of the economy declined 3,000, the first decline since November 2002. Employment in the goods-producing sector declined 76,000, with manufacturing employment falling 44,000, marking their nineteenth and twenty-second consecutive monthly declines, respectively.
Large businesses, defined as those with 500 or more workers, saw employment decline 51,000, while medium-size companies with between 50 and 499 workers declined by 35,000. Employment among small-size businesses, defined as those with fewer than 50 workers, advanced just 7,000 during the month.
Since the ADP report doesn't include govermnment jobs, the rule of thumb is to add around 25k jobs to account for growth in the government sector. That would give an estimate for the BLS non-farm payrolls of a decline of -54k for the month of June.
However, as seen in the table below, in recent months the ADP report has tended to overestimate job growth by an average of 93k jobs per month.
The ADP report has been notoriously unreliable as a predictor of non-farm payrolls recently but it is not completely useless so on balance expect to see some decent job losses in the BLS non-farm payroll report tomorrow. Also pay attention to revisions to previous months which will probably be to the downside.
Other evidence suggesting a softer job market came from the monthly survey of job cuts from Challenger Gray and Christmas, from Bloomberg:
June Job Cuts in U.S. Up 47% From Year Ago, Challenger Says
Firing announcements rose to 81,755 last month, up 47 percent from 55,726 in June 2007, Chicago-based Challenger, Gray & Christmas Inc. said in a statement today.
Companies are trimming staff in order to counter rising raw-material expenses and decreasing demand. The Labor Department may report this week that the U.S. lost jobs for a sixth straight month in June.
``Downsizing in the financial sector has remained heavy, but now we're seeing increased job cuts in other non-housing- related industries, mostly due to the added burden of skyrocketing oil prices,'' John A. Challenger, chief executive officer of the placement company, said in a statement. ``The overall economy could continue to experience net losses for several months to come.''
Also, depsite the fanfare over the better than expected ISM manufacturing report yesterday, the employment component of that index fell from 45.5 to 43.7 suggesting further weakness in the goods producing sector.
To be sure, the ISM non-manufacturing employment component is a more important indicator, however the first decline in the services sector in the ADP report suggests the broader US labor market continues to soften.