The monthly jobs report for August was basically pretty good (relative to expectations that is) with steady growth in jobs and a decline in the unemployment rate to 7.8%. The most-recent weekly jobs report was also good, showing 339,000 new initial jobless claims, the lowest in 5 years (and down from the 380k range where it had consistently been).
I have been thinking over the past week that this might be more backward looking than reflective of ongoing economic strength.
I note first that the Job Openings and Labor Turnover Survey (JOLTS) compiled by the BLS for August (data are released monthly with a two-month delay) looks to me to show a relative stagnation, with 3.56m job openings, down from 3.7m mid-year (2.6m seasonally adjusted job openings – flat for approximately one year).
Even more notable is my very unscientific set of observations as I read the daily news. Over the past two week, I have seen several headlines highlighting job cuts. Companies cutting jobs include Allianz (400 jobs), Bank of America (30,000 jobs, announced March 2012), Advanced Micro Devices [AMD] (2,400 jobs), PayPal (400 jobs), UBS (2,000 jobs), Siemens (8,000 jobs), Sanofi-Aventis (900 jobs), Google/Motorola (4,000 jobs), Cummins (1,500 jobs), Fed Ex (1,700 jobs), Quest Diagnostics (500 jobs). I reiterate that this is neither comprehensive nor scientific. As I try to form an outlook for the future, I take note of data points and news stories, and it strikes me that the number of stories discussing job cuts has increased as we begin to enter the Q3 reporting season.
The stories about job cuts correspond to companies facing difficult operating environments. With weak sales, companies maintain profits by cutting costs. Ultimately, more unemployed individuals means less buying power for the economy as a whole, which, in the worst case, could create a negative, self-reinforcing cycle.
Having highlighted these few negative stories, I return to my initial observation that government jobs data appears ok (perhaps even good). I think that the totality of the information suggests that there is a precarious balance, with risks slightly skewed to the downside.
sources: BofA’s Moynihan Sees More Job Cuts as Economy Sputters; UBS Plans Tech Cost Cuts, Report Says; PayPal plans first job cuts since 2008 financial crisis; Siemens Sketches Savings Efforts as Job Cuts Said to Reach 8,000; Google plans wider job cuts at Motorola unit; Cummins cuts full-year guidance, plans job cuts; Quest Diagnostics cutting 400 to 600 jobs; Job Openings and Labor Turnover Survey (JOLTS)