ADP, SHRM Reports Provide Hopeful Signs For Hiring Growth

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Sep 6, 2012

Today’s employment report from ADP says  the nation added more jobs in August than it has in the last five months. The 201,000 private sector jobs created during what is typically a slow month, is well above the estimates of analysts who were expecting the number to be closer to about 140,000.

ADP and its data partner, Macroeconomic Advisers, also upped the estimate of July’s employment by 10,000 to 173,000 new jobs.

Although the ADP report doesn’t always agree with the government’s monthly jobs report, which is due out tomorrow morning, it is widely watched by analysts and investors for guidance on what the Labor Department report may show. Surveys show economists are expecting tomorrow’s numbers to be much more modest; in the range of about 120,000 to 140,000. Most expect the unemployment rate to be unchanged at 8.3 percent.

However, Joel Prakken, chairman of Macroeconomic Advisers, said in the announcement of the ADP numbers, “The gain in private employment in August is strong enough to suggest that the national unemployment rate may have declined.  Today’s estimate, if matched by a similar reading on employment from the BLS on Friday, will alleviate concerns that the economy has slipped into a downturn.”

The National Employment Report is derived from the payrolls of hundreds of thousands of companies processed by ADP, covering millions of private sector employees. The Labor Department’s Bureau of Labor Statistics derives its monthly report by surveying employers and households across the country. The BLS report includes government.

The methodologies almost assure the numbers won’t match, even when comparing just private sector employment. But they do generally move in the same direction.

The ADP news, plus other reports today on lower unemployment claims and reductions in planned layoffs, come just hours before President Obama is to deliver his acceptance speech tonight at the Democratic National Convention. He’s likely to focus heavily on the economy, as did former President Clinton last night when he nominated Obama. Clinton talked about the challenges Obama faced when he took office and said no president could have fixed the economy in just four years.

Besides the ADP report, the Labor Department’s weekly unemployment numbers offer support for the argument the economy is improving, if slowly. They show that initial claims are down from the same week last year by 46,000 on a seasonally adjusted basis, while the four week average is down nearly 39,000. However, the weekly new initial claims numbers have been as high as 392,000 as recently as early June, but have since been trending down.

Challenger, Gray & Christmas, the global outplacement firm, says the number of planned layoffs fell last month to the lowest since December 2010. Employers announced 32,239 job cuts during the month.

The firm said, “August job cuts were down 12.5 percent from a July total of 36,855,
making it the third consecutive decline in monthly job cuts. Last month was 37 percent lower than August 2011, when employers announced plans to eliminate 51,114 positions from their ranks.”

What’s more, the three month average — June through August — was 35,548, which is the lowest in 10 years.

“Job cuts slowed significantly over the summer, but it is too early to determine whether this is a trend. There have been other signs of economic improvement, including an uptick in home prices and strong automobile sales. However, there seem to be just as many reports showing continued trouble, such as three months of contraction in manufacturing,” said CEO John A. Challenger.

The Society for Human Resource Management released its monthly hiring prediction for September. Its LINE report says manufacturing jobs hiring will pick-up significantly, while hiring in the services sector will see more modest growth.

SHRM says, “A net of 40.8 percent of manufacturers will add jobs in September,” while “A net of 24.8 percent of service sector companies will add jobs.”

However, two other indicators — both from The Conference Board — are not as positive. The Consumer Confidence Index declined in August to its lowest level since November, though it may be more of a short term blip.

Of more concern is the decline in the number of help wanted ads posted online. August’s decline of 109,000 jobs follows July’s drop of 154,000. The last time there were two consecutive months of job ad losses was a year ago, and then the reductions  were a more modest 41,000 in August 2011 followed by Septembers drop of 3,000.

“So far, 2012 is shaping up to be a very slow-growth recovery for labor demand,” said June Shelp, VP at The Conference Board. “August is a month when we normally expect to see employers gear up for the fall, but this year, labor demand was disappointingly below seasonal expectations.”

ADP’s report credits the service sector with most of August’s job growth. The payroll processor says 185,000 service jobs were created during the month, with all but 19,000 coming from companies with fewer than 500 employees. Manufacturers accounted for 3,000 of the 16,000 jobs in the goods-producing sector, where 19,000 jobs came from smaller companies with less than 500 employees. Bigger employers cut payrolls by 3,000.

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