Thursday, May 5, 2011

Employment Indicators

The latest batch of US economic indicators is mixed. On the weak side was yesterday’s US non-manufacturing Purchasing Managers Index (NM-PMI). It dropped 4.5 points in April to 52.8 from 57.3 in March. That is the biggest one-month drop since November 2008. It is down 6.9 points from February’s cyclical high. Interestingly, auto sales also rose to a cyclical high of 13.4 million units during February and edged down to 13.1 million units in April, as we noted yesterday.

The weakness in the NM-PMI was led by a sharp drop in the new orders index and a further decline in the employment index. The former plunged 11.4 points to 52.7, the lowest since August 2009. The latter dropped 1.8 points to 51.9, the lowest since September 2010. This jibes with the recent increase in initial unemployment claims to over 400,000 for the past three weeks. It’s possible that the jobless claims data were boosted in some way by the spring holiday season. Today’s data for the week of April 30 should shed some light on whether this important weekly indicator of the labor market is flashing orange, or is back to green.

On the positive side, the employment index in the manufacturing PMI (M-PMI) was 62.7 during April. That is down only slightly from February’s cyclical high of 64.5. Also the latest Challenger Report shows that large job cuts edged down to 36,490 during April, near recent and past cyclical lows. This series tends to be positively correlated with jobless claims, though covers a smaller subset of the labor market. Also on the positive side is the latest ADP private payroll report showing an increase of 179,000 during April. That was a bit below expectations, but still a solid increase. The really good news this morning is that the Monster Employment Index jumped to 145 during April, the highest reading since October 2008. It is up 23 points over the past three months. The strength is widespread, with good gains in manufacturing, distribution, and transportation.

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