Econ Catch-up (Thursday’s Reports): News Is Generally Positive

Working backwards in terms of when they were released today …

ISM Non Manufacturing Index

Today’s Institute for Supply Management Non Manufacturing Index advanced by 0.6% to 52.6%, indicating slightly stronger expansion (a reading above 50% indicates expansion):

“The NMI registered 52.6 percent in December, 0.6 percentage point higher than the 52 percent registered in November, and indicating continued growth at a slightly faster rate in the non-manufacturing sector. The Non-Manufacturing Business Activity Index registered 56.2 percent, which is the same reading as reported in November, reflecting growth for the 29th consecutive month. The New Orders Index increased by 0.2 percentage point to 53.2 percent. The Employment Index increased 0.5 percentage point to 49.4 percent, indicating contraction in employment for the third time in the last four months. The Prices Index decreased 1.3 percentage points to 61.2 percent, indicating prices increased at a slower rate in December when compared to November. According to the NMI, 11 non-manufacturing industries reported growth in December. Respondents’ comments are mixed and vary by industry and company. Economic growth continues to be slowed by the lag in employment.”

Seven industries showed contraction.

Initial Unemployment Claims

A slight improvement from the previous week, during week which is hard to peg because of the Christmas season. From the Department of Labor:

SEASONALLY ADJUSTED DATA

In the week ending December 31, the advance figure for seasonally adjusted initial claims was 372,000, a decrease of 15,000 from the previous week’s revised figure of 387,000. The 4-week moving average was 373,250, a decrease of 3,250 from the previous week’s revised average of 376,500.

The advance seasonally adjusted insured unemployment rate was 2.8 percent for the week ending December 24, a decrease of 0.1 percentage point from the prior week’s unrevised rate.

UNADJUSTED DATA

The advance number of actual initial claims under state programs, unadjusted, totaled 535,112 in the week ending December 31, an increase of 37,423 from the previous week. There were 578,904 initial claims in the comparable week in 2010.

Optimism should be tempered, at least partially because the previous week (the one just before Christmas) was adjusted upward by a larger-than normal 6,000, and also because the drop in actual claims from a year ago was only about 7.5%.

As I noted last week, we’ll start getting a better picture once we see the numbers from full business weeks, which won’t happen until two weeks from now.

ADP Private-Sector Job Additions

Relatively good news here, especially when compared to the other 29 months since the recession officially ended in June 2009:

ADP today reported that employment in the U.S. nonfarm private business sector increased by 325,000 from November to December on a seasonally adjusted basis. The estimated advance in employment from October to November was revised down slightly to 204,000 from the initially reported 206,000. The increase in December was the largest monthly gain since last December 2010 and nearly twice the average monthly gain since May when employment decelerated sharply.

Let’s hope it holds up in tomorrow’s Employment Situation Report from Uncle Sam. In historical context, it’s worth nothing that nine of the first 30 months of the Reagan-era recovery, when the workforce was 25% smaller, showed monthly private-sector job growth of 325,000 or more, and that monthly private-sector job additions during those 30 months averaged 239,000. If tomorrow really comes in at 325,000, the comparable average during the first 30 months of this “recovery” will be … 70,000.

Mass Layoffs

From Challenger Gray:

CHICAGO, January 5, 2012 – Planned job cuts announced by U.S. employers declined in December to 41,785, the lowest monthly total since June, according to the latest report on downsizing activity from global outplacement firm Challenger, Gray & Christmas, Inc.

The December total was down 1.6 percent from 42,474 job cuts in November. Last month was up 31 percent from December 2010, when employers announced just 32,004 job cuts, which still stands as the lowest monthly total since 17,241 job cuts were recorded in June 2000.

While 2011 went out like a lamb in terms of downsizing activity, with employers announcing an average of just 42,339 job cuts per month over the final quarter of the year, the yearend job-cut total of 606,082 was 14 percent higher than the 529,973 job cuts announced in 2010. However, the 2010 yearend total was a 13-year low. The 2011 total is still well below the recession peak of 1,288,030 annual job cuts reached in 2009.

The increase in job cuts in 2011 was due primarily to heavy job cutting in the government sector, where employers announced plans to eliminate 183,064 jobs, a 29 percent increase from 142,255 in 2010. Government job cuts were 188 percent higher than the second-ranked financial sector, which saw 63,624 job cuts this year.

A large portion of the 2010 job cut increase occurred in September, when job cuts hit a 29-month high of 115,730, more than double the 2011 monthly average of 50,507. Of the September cuts, 80,000, or nearly 70 percent of the total, came from just two organizations: Bank of America and the United States Army.

“Job cuts in 2011 were dominated by the government and financial sectors. These two alone accounted for 41 percent of all the job cuts announced last year. The 183,064 government job cuts represent a record high for that sector, since we started tracking it in 2002. And, while the financial sector did not come close to its record high, annual cuts for the sector were up 165 percent from 2010,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas.

“Unfortunately, these sectors are likely to continue to struggle in 2012. Washington is under immense pressure to cut spending and it looks like every deal to extend tax cuts, raise the debt ceiling and pass the budget will come with measures to cut spending, which can be expected to result in more job cuts.

… But even as job cuts remain low in most sectors, employers still appear reluctant to add jobs. Net job gains picked up at the end of the year, after dipping in the third second and third quarters, but the pace of job creation is still too slow to make a significant dent in the number of unemployed,” said Challenger.

Well, guys, in terms of oncoming government layoffs, it’s either that or go bankrupt as a nation.

… Oh wait, there is a third alternative, which public-sector unions refuse to consider: job-maintaining concessions, especially in gold-plated health care and pensions.

Despite the Army exception, the vast majority of public-sector layoffs are at state and local governments. All too often unions have refused to make reasonable concessions comparable to the private sector. As long as that’s the case, the non-federal layoffs will no doubt continue.