Once more unto the breach, dear friends, once more:
The monthly NonFarm Payroll report rolls out today, and the consensus is none too cheerful: Median estimates of 82 economists surveyed by Bloomberg for April 2008 is for a job loss of -75,000 (Dow Jones had -85,000). Estimates ranged from -150,000 to -18,000. None of the economists surveyed had a positive estimate.
Imagine that: +5,000 is a huge upside surprise.
• James Pethokoukis went even further: “Out: Recession. In: Expansion.”
• Today’s WSJ notes: “In the past 10 business cycles, year-over-year growth in payrolls has averaged 3% in the 12 months leading up to a recession. Twelve months before payrolls peaked this time around, job growth averaged just 1.5%. That could mean there’s not a lot of payroll fat to be trimmed in this downturn. It could explain why weekly claims for unemployment benefits still haven’t climbed to 400,000, the level associated with recessions.”
• ADP employment report shows addition of 10,000 jobs in April.
Hey, that’s not too awful sounding — why are the economists so negative? Let’s consider a few reasons:
• ADP forecast a gain of 10,000 this month. How is that a negative? ADP has significantly understated job losses over the past 5 months. Their overestimates of private payrolls averaged +117,000. So if ADP remains consistent, a triple digit loss is a distinct possibility.
• Jobless claims data were 380,000 (April 26th week) — these are levels consistent with large payroll losses. Also, continuing claims backlog surged 74,000 to new highs (3.019 million). I expect we will see 5.5% unemployment rate by Labor Day.
• BLS has been adding Business Birth/Death estimate jobs at a rate equal to or greater than 2007 rates — a worrisome sign.
• Recent sentiment surveys — University of Michigan sentiment index surrounding the job market outlook was at the worst level since January 1991. The Conference Board perceptions over the labor market deteriorated markedly in April; their ‘jobs-are-plentiful’ index printed its lowest level in nearly three years.
• Challenger layoffs were 90,015 in April — a 68% increase from March, and up 27% Year over year, to a 19 month high.
• Manpower hiring index sank in 2Q to 14 from 17 in the first quarter and 18 a year ago. This was the softest result in four years. Merrill Lynch’s David Rosenberg points out that “a 14-ish number in the past has often coincided with recession and deepening job losses – 2001Q3, 1990Q3, 1981Q1 just to name a few.”
Bottom line: A positive number would be a huge surprise; a 6 figure loss is a small but distinct possibility . . .
Job Cuts May Not Get Too Deep
WSJ, May 2, 2008
The ADP National Employment Report
Manpower Employment Outlook Survey
Q2 2008, United States