Category Archives: Help Wanted Online

ADP Payroll Estimate, Economic Indicators, Help Wanted Online, Trade Deficit

December ADP Jobs, Conference Board Help Wanted Online and November Trade Deficit

KEY DATA: ADP: 241,000/Help Wanted Online: -79,200/Trade Deficit: $39 billion ($3.2 billion narrower)

IN A NUTSHELL:   “A solid labor market coupled with a narrowing trade deficit points to continued strong growth ahead.”

WHAT IT MEANS:  Employment Friday is this week and the first guess at the private sector number comes from ADP, which estimated that employers added workers solidly in December.  That said, the government’s data and the ADP numbers sometimes diverge widely.  For example, ADP estimated that private sector payrolls rose by 227,000 in November while the government put it at 314,000.  But the 3-month trend has tended to be fairly close and that raises a question about Friday’s jobs report.  For the fourth quarter, ADP puts total private sector job gains at 710,000.  After two months, the government has it at 550,000, a difference of 160,000.  Could December’s increase be below 200,000?  Possibly, though I think it will be between 225,000 and 250,000.  Companies of all sizes are adding jobs and that should mean continued solid payroll gains.  I remain optimistic about the job market.

Helping drive the economy forward, regardless what investors might think, is a rapidly narrowing trade deficit.  Exports are beginning to suffer from the weakness around the world, but that is being offset by declining petroleum imports.  The drop in exports is not a major concern as most of the decline came from Boeing shipping were planes.  That is likely just a timing issue.  Vehicle shipments were off as well and that may reflect slower world growth.  On the import side, the only category that posted a sharp gain was cell phones.  Thanks Apple.  Adjusting for prices, it looks like the trade deficit will be fairly stable.  There have been concerns that trade would slow growth in the fourth quarter but right now that is not the case. 

The Conference Board’s Help Wanted Online Index plunged in December after having soared in November.  Actually, this one month up and one month down pattern seems to be a routine that is odd given the consistently strong payroll increases.  These data are supposed to be seasonally adjusted, so I guess I will simply say that the decline in online want ads is a concern that should unwind in a month.

MARKETS AND FED POLICY IMPLICATIONS: The recent data have been disappointing but the ADP and trade numbers were better than expected.  Indeed, today’s reports raise more questions than they answer.  Friday is only two days away so we will have a better picture of the labor market soon enough.  What investors will make of these reports is anyone’s guess.  I don’t even think investors know what they are thinking.  The markets are reacting emotionally so it’s best to simply step back and not make too much of the doings there.  And don’t forget that Wall Street and Main Street have been delinked for a long time so making a judgment about the economy based on stock movements is silly.  As for the Fed, the focus is still on wages but the issues in Europe and the continued low inflation rate are complicating things.

ADP Payroll Estimate, Economic Indicators, Help Wanted Online, Supply Managers’ Non-Manufacturing Index

November Supply Managers’ Non-Manufacturing Index, ADP Jobs and Help Wanted Online

KEY DATA: ISM: +2.2 points: Orders: +2.3 points; Employment: -2.9 points/ADP: +208,000/HWOL: +170,200

IN A NUTSHELL:   “The October lull was just temporary and it looks like the job market is getting better.”

WHAT IT MEANS:  Friday we get the “all important” November employment report but until then, we will be finding out from other sources how the economy did last month.  Right now, all signs are go.  It appears that the services sector pause in October was only to refresh, not depress.  The Institute for Supply Management’s Non-Manufacturing index rebounded sharply in November, led by a surge in new orders.  Similar to the ISM manufacturing report, export demand jumped, though service sector imports grew a little less rapidly.  Despite ramped up production, order books are filling more rapidly and that bodes well for future activity.  The only negative was employment.  But the index simply came down from a very high level to a high level so hiring is still solid.

I am still quite optimistic about Friday’s jobs numbers.  ADP estimates that November private sector job gains came in at a decent though nothing-great level.  Small businesses are hiring like crazy.  That is interesting as the Paychex/IHS Small Business Jobs Index fell in November, so I don’t know what to make of this.  There was some improvement in large firm hiring but that group needs to do more.  And more may be coming.  The Conference Board’s Help Wanted OnLine index jumped in November as the number of new ads surged.  Firms need more workers, but they don’t seem to be doing a good job filling the open positions.  That view was supported by the latest semi-annual survey by Dice Holdings, which indicated that “more U.S. companies are revving up hiring plans”.  Even if Friday’s report is not a huge one, next year is shaping up to be a great one for workers.  

MARKETS AND FED POLICY IMPLICATIONS:  Every day, we continue to see that economic conditions are not only good but they are getting better.  The labor market is tightening and orders are flowing in.  Meanwhile, businesses continue to hold the line on compensation.  Today’s revised productivity numbers indicate that there has been largely no gain in inflation-adjusted earnings over the past year.  That is good for earnings but bad for consumer spending.   Investors should appreciate today’s numbers as they point to a solid but hardly overheating labor market.  That implies the Fed may not be facing demands to raise rates anytime soon.  But the Fed members will be parsing Friday’s unemployment rate and the wages data.  Those are the key indicators and as long as wages remain reasonably well contained, the FOMC can dither. 

ADP Payroll Estimate, Economic Indicators, Help Wanted Online, Supply Managers’ Non-Manufacturing Index

October Supply Managers’ Non-Manufacturing Survey, ADP Payrolls and Online Labor Demand

KEY DATA: ISM (Non-Manufacturing): -1.5 points; Employment: +1.1 points/ADP +230,000/Help Wanted: +11,700

IN A NUTSHELL:   “The electorate may be disappointed with the economy but the numbers are pointing to accelerating growth and a tightening labor market.”

WHAT IT MEANS:  The Democrats got shellacked yesterday and massive discontent with the economy was a key reason for the rout.  But politics is politics and it often has little to do with reality.  In this case, there are reasons voters are correct and reasons they are wrong.  First, the wrong.  Basically, economic activity continues to rise.  The Institute for Supply Management’s Non-Manufacturing Index fell in October, but it remains at a level that is consistent with solid to strong growth.  Importantly, especially with the October employment report coming out on Friday, the employment index continues to break out on the upside.  Few firms are cutting back and more are hiring, a good sign for workers.  New orders continue to grow, but a little less briskly, while production has come down from outer space to the stratosphere.  In other words, everything is moving ahead quite strongly, though maybe not at break neck speed.

Where the electorate was right, was their feeling that their own economic conditions are just not great.  As I have said, ad nauseam, it is hard to spend, or feel good about things, if your income is going nowhere.  But that could change soon.  The labor market is tightening at a rapid pace, and it looks like we get confirmation of that on Friday.  ADP’s estimate of private sector payroll gains came in higher than their number for September and that could mean we will see a very strong October job increase.  The strong rise occurred despite an almost nonexistent rise in large-business hiring.  This sector had been strong for quite some time, so I don’t know what went on.  A firming labor market was also supported by a solid rise in the Conference Board’s Help Wanted OnLine Index.  Firms are looking for lots of people and I suspect they are also hiring a lot more workers. 

MARKETS AND FED POLICY IMPLICATIONS: The sour view about the economy expressed by voters makes sense when you consider that few have seen their wages rise and many have seen their benefits cut and their copays surge.  The only thing that will change that situation is a labor market that forces firms to bid for workers.  Each month, we see more and more signs that labor shortages are starting to appear.  We are approaching full employment nationally, but in some areas, industries and occupations, that condition already exists.  It’s just that shortages need to be more widespread before wage gains will accelerate and benefit cuts will be reversed.  I suspect by the spring, the intransigence toward paying more will fade as job openings become so great that firms have no choice but to start raising offers.  We are not there yet, but the Fed members need to recognize that a rising wage environment is not that far away.  As for investors, any euphoria over the election results may have to be tempered by the simple fact that being in power means you have to actually try to govern, something that neither party has bothered with lately.

Economic Indicators, Help Wanted Online, Job Openings, Supply Managers’ Non-Manufacturing Index

September Job Estimates, Help Wanted Online and Manufacturing Activity

KEY DATA: ADP Jobs: 213,000; Conference Board Help Wanted: -137,200; ISM (Man.): -2.4 points

IN A NUTSHELL:  “The economy doesn’t seem to have picked up any steam in September.”

WHAT IT MEANS:  We had great growth in the spring but that high rate doesn’t look to have been sustained as the summer ended.  Today’s string of September numbers were simply disappointing.  The ADP estimate of private sector job gains was okay, but below what we need to have for the labor market to really be strong.  Essentially, it looks like it was more of the same.  What this means for Friday’s number is unclear.  ADP believes that the private sector created about 415,000 jobs in the last two months.  The Bureau of Labor Statistics’ first estimate of August private sector payrolls was a modest 134,000 rise.  Barring a major upward revision to the BLS August number, to get the two in synch would mean job gains of at least 250,000.  As for the ADP report, small and large businesses hired solidly.  The softness was in the mid-sized sector.  Why?  That is anybody’s guess.  As an added insult to those of us who think that the labor market is stronger than perceived, the Conference Board reported that online want ads fell sharply in September.  The trend is still up but the data are bouncing around an awful lot.

On the manufacturing front, the sector continues to expand solidly, but maybe not as robustly as it had been.  The Institute for Supply Management’s September activity index fell led by a sharp deceleration in order growth.  Let’s keep in mind that this is a diffusion index and if you reach a high level of orders and stay there, the index actually goes down.  The level of the index is still very high, indicating that demand is strong, which can be seen in robust and expanding production.  Hiring, though, did moderate.  Let’s see now: Orders are flowing in, production is ramping up but job growth is softening.  Got it.  Maybe the shrinking of backlogs can explain that.

MARKETS AND FED POLICY IMPLICATIONS: The first estimate of third quarter growth will be released at the end of October, so we have a month to wait.  It looks like the economy continued on a solid pace during the summer but well off the 4.6% rate posted in the spring quarter.  The recent data have provided few signs that the economy is picking up steam.  It would be nice to get a few quarters in a row of north of 4% growth but I doubt we will get that for a while.  Third quarter growth should be closer to 3% than 4%.  But at least the last six months have been pretty good.  Growth in the 3.75% range is something we have dreamed about yet people are discounting it.  I think that says a lot about how we are evaluating the economy.  Meanwhile, investors are waiting for Friday’s employment report and watching Hong Kong and the dollar, so who know if even today’s numbers will matter much.  As for the Fed, it still is all about the labor market and that means Friday is the big day.  I am sticking to my stronger than expected forecast but the consensus is for something in the 220,000.  An average number will keep the pressure off Fed Chair Yellen, but only as long as the other data remain moderate.

Economic Indicators, Federal Reserve Policy, Help Wanted Online

August Conference Board Online Help Wanted

KEY DATA: Ads: up 164,600

IN A NUTSHELL:  “With job openings rising as unemployment is falling, is there really any doubt that the labor market is tightening?”

WHAT IT MEANS: Businesses are out there looking for workers all over the place.  The Conference Board’s Help Wanted Online Index jumped sharply in August.  The rise in labor demand was spread across the nation as only five states had lower levels of ads.  Seventeen of the top twenty metropolitan areas reported gains.  Philadelphia was not one of them, though.  Which jobs are seeing an increase in demand?  All of them!  Every occupation category posted a rise in want ads.  All of this is created some real labor shortages, not just a tightening in the labor market.  The ratio of the number unemployed to the number of job openings is a measure of labor availability.  Over the past three months, that ratio has averaged 1.93 workers per opening.  To put that in perspective, from May 2005, when the data were first released, to December 2007, when the expansion ended, the ratio averaged 1.95.  In other words, the current measure of availability is lower than what it generally was during a significant portion of the previous expansion.  Looking at occupations, computer and mathematical science, healthcare practitioners, management and business and financial operations all have ratios less than one.  In other words, they have already hit labor shortage status.

MARKETS AND FED POLICY IMPLICATIONS:  We still have to wait for Friday’s report to see how much, if any, the labor market tightened in August.  Regardless, most of the labor market tightness indicators are flashing red.  So, why are we not yet seeing any pressure on wages?  My argument, which I have made a number of times in the past, is simple:  Business leaders have not had to worry about compensation or attraction and retention issues for so long that they don’t believe they have to do anything but pick the perfect job candidate and pay the person what they want to pay them.  Well, Bob Dylan said it best: “The times, they are a-changin’”.  Maybe the best way to end this piece is to quote the lyrics, which when it comes to the labor market may be the clearest warning:

Come gather ’round people
Wherever you roam
And admit that the waters
Around you have grown
And accept it that soon
You’ll be drenched to the bone
If your time to you
Is worth savin’
Then you better start swimmin’
Or you’ll sink like a stone
For the times they are a-changin’.

(Copyright © 1963, 1964 by Warner Bros. Inc.; renewed 1991, 1992 by Special Rider Music)

ADP Payroll Estimate, Economic Indicators, Help Wanted Online

June ADP Payroll Estimate and Help Wanted Online

KEY DATA: ADP: 281,000; Small: 117,000; Medium: 115,000; Large: 49,000/Online Ad Demand: up 155,900

IN A NUTSHELL:  “Hiring is strengthening and that, more than anything else, is pointing to much better growth ahead.”

WHAT IT MEANS: It’s the week of the employment report, which will come out tomorrow and that means we get the first attempt at estimating the number with the ADP report.  The employment services company looks at private sector payroll numbers and came up with a huge increase in June.  The details were quite positive.  Firms of all size added lots of new workers.  The big gains in small firms indicate that the expansion is quite broad based.  That is confirmed with the industry data, where hiring was good in manufacturing, construction and all service-related firms.  

Another report that points to a strengthening of the labor market was The Conference Board’s Help Wanted Online Survey, which showed that openings rose solidly in June.  Every one of the occupational categories was up.  Geographically, strong gains were posted in the Northeast, South and West.  The only weakness was in the Midwest, where demand was essentially flat.  Eighteen of the twenty metro areas also showed increases with only one down and one flat.  There was a caution raised in the report.  Over the year, demand for professional workers was down while ads for lower-wage workers rose. 

MARKETS AND FED POLICY IMPLICATIONS:  The ADP report has been somewhat underestimating the Bureau of Labor Statistics numbers recently so it is possible the June number makes up for that shortfall.  But the widespread nature of the payroll gains in the ADP report implies that the consensus of about 215,000 may be too low.  I have been in the 250,000 range so I will keep my estimate, but I have tended to be a bit aggressive.  Nevertheless, I expect tomorrow’s report to be quite good and if the unemployment rate does decline, as the low unemployment claims point to, it would create a very positive buzz going into the July 4th weekend.  Those thinking that the Fed will be on hold not only through this year but next year and into 2016 may have to rethink their forecasts as the unemployment rate will be closing in on full employment.  Indeed, the ratio of unemployed to job openings is falling to a level that is indicating the emergence of labor shortages in some regions and metro areas.  The markets and the Fed have not shown any inclination to believe that wage pressures could build anytime soon.  That may be a mistake.  But today we can conjecture: Tomorrow we get the numbers, so it is wise to wait and see.