The ADP employment report released yesterday shows that the private sector lost 298,000 jobs in August. While this came in higher than the consensus estimate of 250,000 job losses, the number is still a great improvement from 360,000 jobs lost in July. In a related piece of news, the Challenger survey shows that the pace of job cuts is declining. Worker productivity is also up by 6.6%.
As you decode the job losses number, the majority of the job losses are still occurring at the small businesses. This trend may take some time to reverse as small businesses are much more dependent on consumer confidence and credit availability which is still lagging. However, manufacturing activity seems to be picking up so there is a hope that job growth can begin in 3-4 months time.
One of the other signs of the early stages of recovery is a pick up in M&A activity as companies become a little more confident in pursuing deals as they find many cheap assets in the market. This seems to be happening now with a rash of deals having been announced recently. However, as with most M&A deals, this does put a downward pressure on jobs growth as companies try to cut redundant functions and realize synergies. This may be a short term negative but is healthy over the longer term.
All in all I believe we may have to wait a few more months to see an uptick in the jobs number. Hopefully this starts to happen before the housing industry starts to lose steam as the tax credits come to an end in November.