Reuters is reporting Lay-offs surge 85 pct in Aug vs July.
Planned U.S. lay-offs rocketed in August as the housing slowdown and subprime mortgage debacle led to record job cuts in the financial sector, an independent report showed on Wednesday.Temporary Employment Trends
Announced lay-offs surged 85 percent to 79,459 in August from 42,897 in July, according to Challenger, Gray & Christmas Inc, an employment consulting firm. August's job cuts were the highest since February, when they totaled 84,014.
"Nearly half of the August cuts came from the financial sector, as dozens of mortgage and subprime lenders caved under the pressure of a sinking housing market," Challenger, Gray & Christmas said in a statement.
Financial job cuts totaled 35,752 in August, the highest monthly total for the industry since Challenger, Gray & Christmas began tracking in 1993, the firm said.
One of the most spectacular collapses occurred when Melville, New York-based American Home Mortgage Investment Corp., which had been the No. 10 U.S. mortgage lender, filed for bankruptcy in early August and fired nearly all of its work force.
There were many excellent charts on employment trends in the latest Contrary Investor Market Observations.
As you’ve probably heard in consensus commentary lately, many a pundit has stated, “there isn’t going to be a recession as long as unemployment is low and payroll growth continues”. .... If you don’t believe trouble in mortgage credit markets will impact consumer spending quite negatively, maybe trouble in payroll employment will do the trick.On September 2 I talked about much the same thing in Implode-O-Meter Stats vs. the BLS. Here is the pertinent chart:
The first stop on this journey is the very meaningful correlation between temp employment numbers and headline payroll trends. THE major importance of this relationship is that temp employment trends lead the headline payroll employment numbers and rate of change trends. History is more than clear on the subject. Have a look.
... As you can see in the chart above, over the last few months, the year over year change in temp employment has gone negative.
Another lead/lag indicator for headline payroll trends just happens to be the trend in the household survey of payroll employment. For those unaware, each month the BLS (Bureau of Labor Stats) really conducts two payroll employment studies. One is the headline (as reported in the financial press) report whereby the BLS seasonally adjusts data and estimates new business formations and hiring. Since the headline payroll report is really based quantitatively on payroll tax records, and new businesses file these with a lag, the BLS employs the infamous birth/death model to come up with the headline number by estimating jobs already created for which payroll tax records have not yet been received. The second survey, if you will, is the household survey whereby the BLS literally polls folks on the phone. As such, this survey picks up new business formation and hiring trends before the institutional headline report. For now, the year over year rate of change in the household survey is below that of the headline, implying more headline payroll experience downside to come. ....
As a brief tangent, through July, headline payroll growth in the US has totaled 955 thousand new jobs. Not bad. But of this, 773 thousand of these newly created jobs are as a result of birth/death model estimates – 81% of the total.
The B/D model is consistently strong during the February through June period each year. After that, its influence trails off rather markedly, with the exception of August. On an average seasonal basis, the B/D estimation tailwind is about to subside in a big way over the second half of this year. In conjunction with a slow economy of the moment, and the fact that so many indicators we discussed above continue to point south for forward payroll growth, is the headline payroll report headed for tough sledding in the second half of the year if indeed the prior first half strength in estimated job creation subsides? We expect as much.
(click on chart for a sharper image)
Private Sector Employment Slowest In Four Years
MarketWatch is reporting U.S. hiring slowest in four years, ADP says.
Here is the key idea from the above article: "The slowdown in hiring was not related to last month's credit market turmoil"Private payrolls grew by 38,000 in August, following a 41,000 gain in July, ADP said. "A deceleration of employment may be under way," the company said in a release. The report suggests nonfarm payrolls may have grown much less in August than the 120,000 anticipated by economists.The slowdown in hiring was not related to last month's credit market turmoil, said Joel Prakken, chief economist for Macroeconomic Advisers, which computes the index for ADP. Rather, the slower pace of hiring largely reflects the lagged impact of slower economic growth over the past year, he said.Some other employment indicators for August also have been weak. Jobless claims rose in August, while fewer consumers said jobs were plentiful in the consumer confidence survey."All of this points to an August payroll figure, which is lackluster at best," wrote Josh Shapiro, chief economist for MFR Inc.Adding in some 27,000 government jobs not covered by the ADP report, the report suggests the government's figures on nonfarm payrolls probably grew by about 65,000, which would be the smallest payroll growth in nearly three years.After a few big misses compared with the Labor Department figures in its first few months, the methodology for the ADP report has been tweaked and the sample size increased.The ADP report is crafted from anonymous payroll data culled from about 383,000 payrolls representing 23 million workers. The sample is matched to the Labor Department's sample of 160,000 businesses and government offices at about 400,000 work sites.ADP is the one of the largest payroll providers in the world, with more than 570,000 business clients worldwide.
The next five month will show us just how strong (or weak) employment is. It will be especially interesting watching the next few sets of birth/death numbers from the BLS. One of these months there is going to be a massive "unexpected" downward jobs revision. More than likely that will be used as an excuse by the Fed to cut (or further cut) rates. It won't help.
Mike Shedlock / Mish