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The Wall Street Greek blog is the sexy & syndicated financial securities markets publication of former Senior Equity Analyst Markos N. Kaminis. Our stock market blog reaches reputable publishers & private networks and is an unbiased, independent Wall Street research resource on the economy, stocks, gold & currency, energy & oil, real estate and more. Wall Street & Greece should be as honest, dependable and passionate as The Greek.


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Thursday, March 31, 2011

ADP Private Payrolls and Challenger Job Cuts Data Examined

ADP Private Payrolls and Challenger Job Cuts Data

Jobs Data


The latest two labor market data-points to reach the business wire offered mildly positive news that contained components of concern. We examine March's ADP Private Employment Report and Challenger's Job-Cuts Report herein.


Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.


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ADP Private Payrolls and Challenger Job Cuts Data Examined


labor market analystADP's Private Employment Report for the month of March showed another plus 200K increase in its private nonfarm payroll estimate. ADP sees private payrolls rising 201K in March, which it says was in line with economists' expectations and consistent with consensus expectations for the federal government tally of private payrolls, due Friday. ADP also revised its February estimate slightly lower, to 208K, from the 217K reported initially.


The company's commentary indicated this level of change was consistent with a decreasing unemployment rate. It also reported that the last four months of estimates have averaged 211K, which is much higher than the four months just prior, with the average for that period, ending in November, at +74K. That said, ADP has a record of mismatching against the federal government data (at least of late), based on my unscientific observation, which I'm sure plenty of market watchers would agree with. Given its proximity to the government release, just two days prior, I'm not sure the report really carries much weight anyway. Investors tend to just wait a couple days for the DOL data before directing their dollars.


Most of March's improvement was found in the service sector and in smaller sized firms, or the "sweet spot" of the American bat. ADP noted the service sector likely added 164K net jobs in March. That's a lot, but it’s less than February's 187K net job additions for the most important segment of the American economy. Growth within the segment was spread proportionally to the importance of each size segment of American business. So most of the gains came in small-sized companies (0 to 49 employees), where a net 89K jobs were added within small services businesses. Mid-sized services firms (50 to 499) added an estimated 61K jobs, while large servicers (500+) added 14K jobs.


Within the goods producing sector, an estimated 37K jobs were produced in total, spread among 13K in small firms, 21K in medium sized, and 3K by large goods producing firms. Manufacturers added an estimated 37K jobs as a group. Construction employment is also isolated out, and was estimated to have shed 5K jobs in March. Financial services supposedly added 4K employees.


Overall, small-sized firms were estimated to have added 102K jobs, while medium-sized firms were reported to have added 82K and large firms 17K. This again is in line with the spread of jobs across American firms. Thus, there is no obvious anomaly or significant skew to growth that might be inconsistent with the spread of job opportunities that exists among firms, either in goods/services or in the sizes of firms, as far as I can see based a thumbnail of this data.


We do not necessarily dispute ADP's report, but neither are we impressed by the estimated job growth. It is not stellar, and the gains in small businesses are often simply eating capital of well-funded but doomed to fail start-up businesses, like perhaps many blogs. Also, we expect the public sector will pull jobs from the economy this month, given intensifying budget situations across the country. There's evidence of this in Challenger, Gray and Christmas' report for this month, which we detail in the paragraphs that follow.


Challenger, Gray and Christmas reported on Announced Corporate Layoffs for March today as well. Challenger reported improvement, with job cuts decreasing to 41,528, versus the 50,702 noted in February. That month however, was out of place compared to the last half year or so. In fact, through the first quarter, only 130,749 job cuts were declared, which was the lowest for any quarter since 1995.


However, while the total figure came down in March, the segment that is bothering me most these days, the public sector, posted a 17% increase in announced corporate layoffs, to 19,099. That said, the public sector has been shedding jobs for some time now, and so year-over-year comparison presents a completely different view of the situation. In fact, against last March, announced layoffs are down 62% from the prior year period.


That said, Challenger Executive Vice President Rick Cobb expressed concern about upcoming layoffs at the municipality and federal level, given budget battles currently underway. Still, and as we have said before within these pages, it appears that barring a cataclysmic or game-changing event, private organizations are operating at tight workforce levels that would not easily allow for further reductions... barring some important change.


While old areas of weakness, including the Pharmaceuticals, Telecommunications and Automotive industries are much improved in terms of job shedding, there are new leaders cutting costs. The retail sector for instance has already shed 15,768 jobs this year, though that's less than at this time last year. However, the Aerospace & Defense industry cannot boast of the same comparison, as its 7.3K job cuts year-to-date compare against just 2.7K at this time last year. The Financial Sector has also reduced workforce this year by a greater amount than last year.


California leads all layoffs this year, with 22K, which should not be a surprise given its relative population size. The District of Columbia is second though, with 14K layoffs year-to-date, but we can reconcile it to federal cutbacks and related government job cuts. Also playing a role in DC, non-profits are forced to reduce workforce during tough times, as contributions dwindle. Third is Michigan, which is just sad given the tough time the state has already had to deal with due to the significant consolidation of the auto industry.


The good news this last month was that when excluding government jobs, the damage is not so deep. No particular industry had more than 2,400 job cuts. The bad news is that among the reasons for layoffs, the leaders were restructuring, closed down businesses and cost cutting. Truth be told, there aren't many digestible reasons for layoffs on the board. If the current pace holds, we'll match last year's layoff pace, but there is a marked deceleration that will likely take the count well under 2010's 530K layoffs, barring unexpected event.


One such event that we cannot necessarily call unknown any longer is the Middle Eastern unrest driven spike in gasoline prices. Fuel price increase, in conjunction with rising commodity costs and food prices driven by global demand/supply imbalance and dollar dilution, is putting consumers into a sour mood (as just discussed at our blog yesterday). As a result, a new recession may not be too farfetched of a scenario, and anecdotal evidence tells me the economy is vulnerable to a shock like the rise in gas prices. And while employers are not firing, they do not seem to be hiring either, at least based on Challenger's take and our analysis of the unemployment rate. Challenger's report shows announced corporate hiring plans at only 10,869 in March, versus 13,994 last year; though February boasted a count of 72,581. That said, the current hiring pace through 3 months, would have total job creation about matching last year, given no change for the positive.


It is as if the economy is lying in waiting, businesses carefully watching, consumers entrenching, all waiting for the cloud of uncertainty to pass over. Only the investor ventures forth, boldly, but not by courage; instead by greed, he is driven to precede economic revival.

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Article should interest investors in Paychex (Nasdaq: PAYX), Manpower (NYSE: MAN), Robert Half International (NYSE: RHI), 51Job Inc. (Nasdaq: JOBS), Monster World Wide (NYSE: MWW), Korn/Ferry International (NYSE: KFY), Administaff (NYSE: ASF), Kforce (Nasdaq: KFRC), TrueBlue (NYSE: TBI), Dice Holdings (NYSE: DHX), Kelly Services (Nasdaq: KELYA), SFN Group (NYSE: SFN), CDI Corp. (NYSE: CDI), Cross Country Healthcare (Nasdaq: CCRN), On Assignment (Nasdaq: ASGN), AMN Healthcare Services (NYSE: AHS), Barrett Business Services (Nasdaq: BBSI), Hudson Highland Group (Nasdaq: HHGP), StarTek (NYSE: SRT), RCM Technologies (Nasdaq: RCMT), VirtualScopics (Nasdaq: VSCP), American Surgical (OTC: ASRG.OB), Medical Connections (OTC: MCTH.OB), iGen Networks (OTC: IGEN.OB), St. Joseph (OTC: STJO.OB), General Employment Enterprises (NYSE: JOB), Total Neutraceutical (OTC: TNUS.OB), TeamStaff (Nasdaq: TSTF), Stratum (OTC: STTH.OB), Purespectrum (OTC: PSRU.OB), Corporate Resource Services (OTC: CRRS.OB), Bank of America (NYSE: BAC), J.P. Morgan Chase (NYSE: JPM), Goldman Sachs (NYSE: GS), Citigroup (NYSE: C), Morgan Stanley (NYSE: MS), Wells Fargo (NYSE: WFC), TD Bank (NYSE: TD), PNC Bank (NYSE: PNC), General Electric (NYSE: GE), Wal-Mart (NYSE: WMT), McDonald's (NYSE: MCD), Alcoa (NYSE: AA), American Express (NYSE: AXP), Boeing (NYSE: BA), Caterpillar (NYSE: CAT), Cisco Systems (Nasdaq: CSCO), Chevron (NYSE: CVX), DuPont (NYSE: DD), Walt Disney (NYSE: DIS), Home Depot (NYSE: HD), Hewlett-Packard (NYSE: HPQ), IBM (NYSE: IBM), Intel (Nasdaq: INTC), Johnson & Johnson (NYSE: JNJ), Kraft (NYSE: KFT), Coca-Cola (NYSE: KO), 3M (NYSE: MMM), Merck (NYSE: MRK), Microsoft (Nasdaq: MSFT), Pfizer (NYSE: PFE), Procter & Gamble (NYSE: PG), AT&T (NYSE: T), Travelers (NYSE: TRV), United Technologies (NYSE: UTX), Verizon (NYSE: VZ), Exxon Mobil (NYSE: XOM). The day’s earnings included Deere (NYSE: DE), Tiffany (NYSE: TIF), China Cord Blood (NYSE: CO) and Frontline (NYSE: FRO).


Please see our disclosures at the Wall Street Greek website and author bio pages found there. This article and website in no way offers or represents financial or investment advice. Information is provided for entertainment purposes only.

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