The ADP private sector jobs report for May released this morning suggests that while job losses are still at intolerably high levels, job losses may have peaked.
The private sector cut 532,000 jobs in May, following a revised 491,000-job-loss in April, according to data compiled in the ADP National Employment Report (pdf).
In fact, ADP characterized the job loss trend as "a notable improvement over the first three months of the year, when the [private sector] losses averaged 691,000."
Economists surveyed by Bloomberg News had expected private employers to cut 525,000 jobs in May, after cutting 491,000 in April. Private employers cut 708,000 jobs in March and 706,000 in February.
The job loss totals in May by business size (large, medium, small): 100,000, 223,000, 209,000.
Further, the services sector -- formerly a U.S. strength during the recent economic expansion -- lost 265,000 jobs. Manufacturing lost 149,000 jobs -- its 39th straight monthly decline. The construction sector lost 108,000 -- its 28th consecutive monthly decline, and brought total construction jobs lost since the January 2007 peak to 1.345 million.
'Less worse' represents an improvement
Sal Guatieri, a senior economist with BMO Capital Markets in Toronto, argued that economic conditions are getting better in that they are getting less worse.
"The rate of economic contraction is moderating, and we expect positive growth in the fourth quarter," Guatieri told Bloomberg News Wednesday. "It'll be a very subdued recovery, basically absent the consumer."
Few economists expect U.S. consumption patterns to return to the home equity / cash-out-refinance distorted cash-flush years of the housing bubble. However, most economists do expect both consumer spending and business investment to trend slightly higher beginning in the second half of 2009. Further, the Obama administration expects the $787 billion federal stimulus package passed earlier this year to save or create about 3.5 million jobs nationally, thus boosting consumer demand.
Economic Analysis: A roughly inline report: private job losses came in at the consensus estimate – no major accomplishment, but if job losses continue to fall, one can at least argue that job losses are declining. Still, that's a far cry from the 150,000 to 200,000 jobs the U.S. economy needs to add every month to lower unemployment, hence no one should celebrate anything yet.
Further, investors should keep in mind that the more-telling statistic, containing both private and public sector job data, is the U.S. Labor Department's monthly payroll statistic, which will be released Friday, June 5 at 8:30 a.m. EDT. That report is expected to show a 530,000-job decline in May after a 539,000 loss in April, according to a Bloomberg News survey of economists.
Investors should monitor the job report because job creation is positively correlated with corporate revenue and earning gains. And as corporate earnings go, so goes the U.S. stock market.
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