Layoffs Up 20% in November

Money minders and economy watchers got bad news Thursday when Challenger Gray & Christmas reported Job Cuts climbed by 20% in November. It’s a bad sign for an economy on the brink of a fiscal cliff freefall. Furthermore, the situation seems to be deteriorating in December, with a high profile mass purge plan just admitted by Citigroup (NYSE: C).

Layoffs

Regarding November, immediate blame wants to find Hurricane Sandy, but the responsibility falls upon the bankruptcy of Hostess Brands and its mass impact to the labor count, with 18,500 jobs lost on the bankruptcy alone. If not for the Hostess failure, announced layoffs would have fallen in November from October’s tally of 47,724. Instead, we saw the layoff count rise to 57,081.

Still, big layoffs are commonplace, however unpredictable. After all, the month marked the third consecutive increase. That reflects poorly on the fourth quarter, so that the year-to-year improvement marked thus far in 2012 might narrow before year’s end. Through November, year-to-date, total layoffs have measured 13% less than in 2011, at 490,806. The pressure is not easing either with Citigroup’s (C) just announced reduction of 11,000 jobs; those will impact December’s data.

Big impact layoffs have dictated doom in 2012, with Hewlett-Packard’s (NYSE: HPQ) high profile headcount cut of 27,000 workers in May. In October, Ford (NYSE: F) workforce reductions made up almost a quarter of the total layoffs for the month. Citigroup’s cuts may be followed by more massacres on Wall Street in December. According to Challenger's data, New York is already third in job cuts this year, behind California and Texas. A New York Post article published in late September which referred to the comments of a banking analyst at Nomura, indicated that banks would need to cut workforce to safe-keep return to shareholders.

Some say the workforces of Wall Street will be 10% to 15% slimmer in 2013. European banks have been more active for obvious reasons, with Deutsche Bank (NYSE: DB) announcing a cut of 1900 people in July. UBS (NYSE: UBS), Credit Suisse (NYSE: CS) and Goldman Sachs (NYSE: GS) announced cuts around the turn of last year. Bank of America (NYSE: BAC) has continuously chipped away at the 30,000 jobs it said it would shed last year in September. Morgan Stanley (NYSE: MS) is likewise working on previously declared firings. J.P. Morgan Chase (NYSE: JPM) has actually added jobs over the last three years. Still, with margins tight due to record low interest rates, and with global economies at issue and markets complicated as a result, the banks have increasingly turned to expense reduction to save return to shareholders. Still, layoffs can go too deep and significantly impair revenue generation, so a fine dividing line must be carefully approached on Wall Street. Financials led layoffs in years past, but this year’s biggest job cutters by industry have come from computers (on HP), transportation (Ford), food (Hostess), Healthcare/Products & Retail.

The end of the year can be hotter for the hook, as companies look to meet their new (and likely slimmer) budgets. Likewise, a tight and limited bonus pool can influence thinking about inefficient producers. A quick cut can mean a fatter bonus for survivors, ignoring the costs of litigation etc. Some companies also benefit from a write-off around the close of the year, to help fog the red reality they might otherwise have to show shareholders. Finally, I believe the fiscal cliff issue has frozen the hands of small businessmen, and that the cliff and also the re-election of the health conscious President has large and small firms contemplating rising healthcare costs and workforce counts. Whatever the case, I think we can all agree the current period is not one inspiring of new hiring. As I continue to cover economic reports and the economy, readers may want to follow the column.

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.

Jobless Claims Above 400K are Worth Worrying About

On Wednesday, when the Labor Department reported that Weekly Initial Jobless Claims stuck above 400K for a second straight week, it became harder to blame Hurricane Sandy for the issue. Indeed, we questioned whether the storm was completely to blame last week, and with each passing week, it will become a less important factor.

If over the next week or two claims stick above 400K, then the market will be forced to consider whether an important change is occurring in the economy and why. Stocks may have already started to worry about this specific measure, given the trend turning decline that occurred on Wednesday morning, before stocks closed fractionally higher. You can see this clearly in the activity of the SPDR S&P 500 (NYSE: SPY), SPDR Dow Jones Industrial Average (NYSE: DIA) and the PowerShares QQQ (Nasdaq: QQQ), with the morning dip visible on Wednesday within the 5-day chart. Of course, some of the decline could have been attributable to a miss in Consumer Sentiment against economists’ consensus expectations; on the slow pace of Leading Economic Indicators; or on some other factor including Middle East unrest. Resurfacing concern about Congress’ ability to mitigate the fiscal cliff should certainly be a consideration as we enter December.

Chart at Yahoo Finance

The latest jobless claims count, covering the period ending November 17, showed a 41,000 decrease from the Hurricane Sandy laden period of the week before, but claims still measured 410,000. Obviously, the storm destroyed property and life, and affected local economies in a meaningful way. Many small businesses were forced to lay off employees as a result. A lot of those employees are probably still unemployed today. So, for now, the four-week moving average of jobless claims matters more. The average, however, was approaching 400K as well, at 396,250 through the period. Over the weeks ahead, the storm related impact will dissipate, as New York and New Jersey residents recover.

However, what impact has the fiscal cliff had on hiring and firing? In my estimation the issue is affecting the economy right now. Many small businessmen have effectively frozen their expansion plans, given the uncertainty about forward tax rates and due to the healthcare burden some are being asked to pay now. We discussed this in detail in our report, Small Businessmen will Lose Hope into the Cliff.

The trouble extends beyond small business though, because of economic realities and due to changes in laws and regulations. Obviously, the Hostess Brands reorganization is going to cost America jobs, approximately 627 or so to be more precise. Among recent corporate layoff announcements were Smithfield Foods (NYSE: SFD), which is planning a closure and layoffs at a Virginia hot dog plant. Some operators like Papa John’s (Nasdaq: PZZA) and Applebee’s - of DineEquity (NYSE: DIN) - said new healthcare costs will impact how they manage their workforces.

In conclusion, this latest rise in Weekly Jobless Claims is noteworthy and should be watched as the effects of Hurricane Sandy fade. Especially as the fiscal cliff is resolved, we should see how satisfied businesses are based on their investment and hiring activity that follows. And yet, the burdensome economies of Europe will weigh; the disruption in the Middle East will frighten; and a slow moving domestic economy will continue to restrain the labor market.

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.

Is the Jobless Claims Surge on Sandy or Something More?

It happened! Jobless claims surged to over the psychological threshold of 400K. Some time back, we warned that one dreaded Thursday morning we would wake up to a stock market demise catalyzed by jobless claims over 400K. We even said that you might consider reducing risk on Wednesday afternoons as a hedge. Well, this report is not going to be the one to catalyze a slide, so you can contain your concern, though you still have plenty to worry about regarding the fiscal cliff right now. The reason this latest report shouldn’t overly concern investors is the media’s ready acceptance of a Hurricane Sandy impact, which very likely did affect filings in several ways. Since it will be difficult to pinpoint the impact, stocks should overlook the psychological break, at least for now. However, take note that the movement in the employment services companies this morning seems to indicate some market suspicion about the true driver of today’s reported surge in jobless claims.

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.

Jobless Claims

Weekly Initial Jobless Claims surged by 78,000 to 439,000 in the week ending November 10, 2012, which was significantly more than the economists’ consensus for 376K. Still, Hurricane Sandy has added some significant noise to the data, as should be the case for economic reports across the board over the next month or two. A more reliable trend metric, the four-week moving average for weekly claims, increased by 11,750 in the reported period, to 383,750.

Insured unemployment edged up by a tenth of a percentage point to a 2.6% rate in the lagged November 3 ending period. The number of insured unemployed Americans increased by 171,000 in that same period, rising to 3.33 million. The number of Americans claiming benefits of some sort through all programs decreased by 100,423 in the period ending October 27, falling to 4.98 million. As we have noted in the past, there are of course two drivers of this trending decline. First, some Americans are finding work. However, many Americans are simply exhausting their allotted benefits and falling off the workforce radar.

Weekly jobless claims may very well rise legitimately above the 400K psychological threshold in 2013 for a variety of reasons. Still, the nation’s largest employers, including Wal-Mart (NYSE: WMT), Target (NYSE: TGT), McDonald’s (NYSE: MCD), Sears (Nasdaq: SHLD) and Kroger’s (NYSE: KR) are not likely to shed jobs anytime soon due to the necessities they provide at value. However, small businesses, which employ more Americans than any other sector of the economy, are likely losing confidence due to the fiscal cliff, and could very well cut workforce if their taxes rise.

For informational purposes, I always like to relay the state relative data for interested readers. The highest insured unemployment rates in the week ending October 27 were in Alaska (4.5), Puerto Rico (3.9), California (3.0), Oregon (3.0), Pennsylvania (3.0), Virgin Islands (2.9), Arkansas (2.7), Nevada (2.7), New Jersey (2.7), Illinois (2.6), New York (2.6), and North Carolina (2.6).

The largest increases in initial claims for the week ending November 3 were in Pennsylvania (+7,766), Ohio (+6,450), New Jersey (+5,675), Michigan (+2,373), and Connecticut (+1,783), while the largest decreases were in California (-8,149), New York (-2,241), Florida (-939), Georgia (-913), and Indiana (-603).

In closing, the shares of employment servicers are sensitive to this weekly report, and so the impact of the week’s change can best be read through their movement. The action in industry shares follows.

Company & Ticker	Thursday Morning Change
Robert Half (NYSE: RHI)	+0.15%
Korn Ferry (NYSE: KFY)	-0.51%
Monster Worldwide (NYSE: MWW)	-6.8%
Manpower (NYSE: MAN)	-1.5%
Kelly Services (Nasdaq: KELYA)	+0.15%
CTPartners Executive Search (NYSE: CTP)	-0.74%
On Assignment (Nasdaq: ASGN)	+1.3%

The wide variance in the movement of these shares is likely due to the noise in the weekly economic report discussed here, and also due to the dynamics of specific service providers. For instance, Kelly Services, a provider of mostly temporary workers, tends to move counter to the shares of executive search firms, some of which are listed here. This is because of the propensity of employers to choose between temporary and full-time workforce depending on their perspective of the economic outlook. I would say the stock action depicted here says investors are suspicious of how much impact Sandy has had to the week’s data and what is due to real ongoing economic issue. Only the weeks ahead and its less noisy data will give the market the answer it seeks today, so stay tuned as we cover it here.

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.

Jobless Claims Return to Reality

Weekly Initial Jobless Claims jumped by 46K in the latest reporting period, but it comes after the prior week’s sharp decline of 30,000. So where does the truth lie?

Just reported today, Weekly Initial Jobless Claims for the week ending October 13th, increased by 46K, rising to 388K. It was a notable jump in claims, but it came after a substantial decrease the week before, which took claims to a level not seen since early 2008. Many simply accepted the data for the truth, while others, including yours truly, were highly skeptical. Over the course of the last week, the Department of Labor and the media helped to uncover the truth, though in a less than perfectly fluid manner.

As it turns out, because the unemployed are required to recertify their state of unemployment at the start of a quarter, it can lead to swings in the first few weeks of data reporting. It seems that in at least one state, this certification period may have shifted by a week, causing the last two weeks of swing. While representatives of California last week refuted claims that some of its reporting regions had not reported claims, perhaps this explains why California, which usually posts increased adjusted numbers at the start of a quarter, posted a decrease last week. Again, this is only theory.

Now, if you want a more solid number to base your perspective on, take note that the four-week moving average for jobless claims only increased by 750 in the latest period, to 365,500. Still, even the four-week figure would seem to be skewed, and should increase after last week’s low count ages out.

What we’re left with after the dust has settled is a labor situation that seems to better reflect the true state of the labor market today. Still, that true state is again fogged by the reported decrease of insured unemployment to 2.5% in the week ending October 6, from 2.6% the week before. The Bureau of Labor Statistics today said the number of unemployed Americans receiving benefits fell by 29,000. The number of people receiving a benefit of some sort fell by 42,664 in the week ending September 29, to 5.0 million. Of course, much of this is due to the long-term unemployed exhausting their benefits and falling out of the labor force count. We have covered this fact time and again, and once more in our report entitled, “The Under-Employment Rate Shows Same Misery.”

The market as illustrated by the ETFs measuring the movement of the S&P 500, Dow Jones Industrials Average and the NASDAQ, are relatively unchanged through midday Thursday. That’s probably because the bad news reported for the labor market contrasts with the better than expected Leading Economic Indicators Index.

INDEX ETF	Midday Change Thursday
SPDR S&P 500 (NYSE: SPY)	+0.1%
SPDR Dow Jones Industrials (NYSE: DIA)	+0.2%
PowerShares QQQ (Nasdaq: QQQ)	-0.1%

While reporting earnings, many companies are also announcing layoffs. Today it was Abbot Labs (NYSE: ABT) saying it would cut 550 jobs. Newsweek, owned by IAC/InterActiveCorp (Nasdaq: IACI), declared it would stop publishing its iconic magazine and go to digital only distribution, which means layoffs are pending. Layoffs are expected at Advanced Micro Devices (NYSE: AMD), rumored at eBay’s (Nasdaq: EBAY) Paypal unit, and being delayed at a Whirlpool (NYSE: WHR) development center due to attrition of employment ahead of the planned cuts. I continue to expect the weight of global economic issues to weigh on our economy further, along with the effects of the fiscal cliff crisis pending, and/or an energy crisis catalyzed by war with Iran. So, I continue to warn that some sad Thursday morning, when claims exceed 400K, stocks may retract more meaningfully.

Last week, when the low jobless count was reported, the shares of most employment services companies rallied. This week, the shares of major players are mixed on a significant degree of company specific data, so we’ll leave those numbers out of this report. For future coverage of the regular labor data points follow my column.

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.

Jobless Claims Improvement Likely Just Seasonal

Report Update: One unnamed important state failed to report claims for all of its regions this week. Due to the unreported claims from an important state, not noted within the DOL report, today's gains in stocks and employment services firms were on soft or even false footing. They should vanish and reverse accordingly.

Prior to our discovery of the anomaly, and due to the poor reporting of the DOL on this issue - leaving it out of the weekly report release, we initially sought to explain what seemed to us to be surely erroneous data (we were right) as follows.

Weekly Initial Jobless Claims improved impressively last week, but there might be a seasonal reason for what could prove to be an exaggerated improvement. I see two possibilities, an obvious one which is likely only slightly skewing the number, and one theoretical idea that could be playing a larger role. Of course, there’s also the possibility that the flow of jobless claims is legitimately improving, but I find that difficult to believe given the flow of other economic data.

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.

Jobless Claims

Jobless claims fell by 30,000 in the period ending October 6, declining to 339K. The four-week moving average for jobless claims also fell, by 11,500, to 375,500. It certainly would seem like good enough news if not for the time period covered.

While the Jewish holiday of Yom Kippur was on the 25th and 26th of September (outside of this reporting period) with work forbidden during the period, the Jewish holiday of Sukkot, with work likewise forbidden, ran through the period of reporting last week. This could have affected both the filing of unemployment and the processing of claims, but to what degree?

It is hard to measure the exact extent of impact for the reporting period, because religious holidays are not necessarily strictly followed in America by followers of all faiths today. For example, I know a great many people of my own faith who work on Good Friday. Thus, we cannot be sure of the percentage of Americans for whom the factors of faith and new unemployment mattered last week. Still, we neither can be sure the reporting period was clear of noise. Next week’s data will not be clear of holiday issue either, as it has Columbus Day to incorporate.

Another seasonal factor could have played an important role in the reported improvement. As it is earnings season, companies about to report results below their forecasts or the estimates of analysts may be saving layoff announcements to coincide with their earnings results. When a company misses, it will often take action immediately in order to reassure investors that it is actively working to end the trend. Thus, new jobless claims that might have been announced over the last couple of weeks may perhaps have been postponed for announcement with pending poor earnings reports. The third quarter earnings season is not expected to be robust, and earnings warnings continue to threaten stocks generally.

Looking further into the data, the insured unemployment rate was unchanged at 2.6% for the period ending September 29. The exact count of the insured unemployed improved by 15,000 to 3.27 million Americans. The number of people claiming benefits under all programs for the week ending September 22nd declined by 43,970, though still numbering 5.04 million. It’s important to note that extended benefits were only available in New York.

The highest insured unemployment rates in the week ending September 22 were in Puerto Rico (3.9%), Alaska (3.7), Virgin Islands (3.7), Pennsylvania (3.2), New Jersey (3.1), California (3.1), Connecticut (2.9), Nevada (2.7), and Oregon (2.7).

The largest increases in initial claims for the week ending September 29 were in New York (+2,764), California (+2,069), North Carolina (+1,217), Pennsylvania (+989), and Arkansas (+538), while the largest decreases were in Mississippi (-3,393), Michigan (-2,639), Florida (-1,972), Ohio (-1,723), and Oregon (-1,135).

The shares of employment services companies tend to move on this data and are listed below. All of the companies are higher, and some relatively more than the move in the market represented here by the SPDR S&P 500 ETF (NYSE: SPY). To the extent that the gain is more than the general relationship of each security to the market, as represented by beta, it is likely due to the new claims data.

Company & Ticker	Thursday Change
Robert Half (NYSE: RHI)	+0.1%
Korn Ferry (NYSE: KFY)	+0.6%
Monster Worldwide (NYSE: MWW)	+1.2%
Manpower (NYSE: MAN)	+1.7%
Paychex (Nasdaq: PAYX)	+0.1%
On Assignment (Nasdaq: ASGN)	+2.4%
Kelly Services (Nasdaq: KELYA)	+1.5%
SPDR S&P 500 (NYSE: SPY)	+0.6%

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.

Jobs Report Celebration is Ill-Advised

The stock market is celebrating the perceived strong jobs report today, but I see the rally premature and ill-advised. The gains of stocks broadly, are therefore on poor footing and should retrace after retrospection.

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.

Index ETF	Friday Morning Change
SPDR S&P 500 (NYSE: SPY)	+0.7%
SPDR Dow Jones (NYSE: DIA)	+0.6%
PowerShares QQQ (Nasdaq: QQQ)	+0.6%
iShares Russell 2000 (NYSE: IWM)	+1.1%
Wilshire 5000 (Nasdaq: WINDX)	+0.7%

Stocks gapped open higher, as indicated by the chart of the SPDR S&P 500 (NYSE: SPY) here, on the 8:30 AM EDT release of the monthly Employment Situation Report.


Chart by Yahoo Finance

The market excitement is because if employment is truly improved by three-tenths of a percent to 7.8%, then the economy is on a better track. If more people are employed, consumer spending should improve and America’s companies should see better earnings per share results.

The gain to the bottom line of the P/E equation would not be the only improvement. Confidence would rise in our economy and on our outlook, and so the value given to stocks would expand on expectations of better earnings. Thus, the numerator of the P/E valuation metric would also improve.

Alas, the problem is that the gains in the jobs report are suspect, at least in my view. First of all, the nonfarm payroll gain of 114K for September is nothing to write home about. Furthermore, in an earlier article, I noted that the under-employment rate was unchanged in September, even as unemployment improved. Moreover, its absolute level of 14.7% is still troubling. And the gain in the unemployment rate came on higher part-time employment, not full-time, which would be worth celebrating. Thus, any spending gains would be tempered, since part-time workers make less than full-time employees do generally.

A hungry market celebrated this data for two reasons. First and foremost, at least it didn’t show deterioration. Unfortunately, on a fractional basis, the under-employment rate actually deteriorated slightly. Still, with the focus of the market and the nation on the headline figure, an improvement is at least better than deterioration, even given its faults. Second, the report shows improvement on some basis, because one might say, at least more people are working, whether it be part-time or full-time. Unfortunately, on net, the change in employment to part-time also drives lower overall income produced for the economy.

Stocks of cyclical companies like financials and others are higher on the day as well. These stocks have beta ratios above 1.0, indicating their sensitivity to the broader economy and market. They therefore exaggerate the moves of the market, and they are doing so today on this report.

Cyclical Companies	Morning Change
Citigroup (NYSE: C)	+1.0%
Boeing (NYSE: BA)	+1.4%
General Motors (NYSE: GM)	+2.7%
General Electric (NYSE: GE)	+0.9%

Unfortunately, given my view that the gains are suspect and on poor footing, and with a fiscal cliff, slowing global economies, and Iran confrontation ahead of us, I recommend investors sell on rallies at least through October and potentially through the close of the year, depending on the election. Look for a follow up report on my column feed regarding how I believe politics could drive a rally post election or leave stocks in the lurch.

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.