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Posts Tagged ‘unemployment rate’

A report just out from the payroll giant, ADP (Automatic Data Processing) says that the drop in its Employer Services gauge was larger than the 663,000 jobs that economists had forecast, and was the most since records began in 2001. Its February’s reading was revised upwards to show a cut of 706,000 workers from a previous estimate of 697,000.

The figures were compiled by the forecasting firm Macroeconomic Advisers, using ADP payroll data from 400,000 businesses and it covered around 24 million workers.

The ADP report showed a reduction of 327,000 workers in goods-producing industries, and employment in manufacturing dropped by 206,000 whilst service providers cut 415,000 jobs.

A Labor Department report that is due out April 3 is expected to show that payrolls at companies and government agencies shrank by 658,000 in March, and that unemployment rose to a 25-year high of 8.5 percent.

Details in the ADP report show that companies which employed more than 499 workers reduced their workforces by 128,000 jobs; medium-sized businesses that employed between 50 to 499 employees, cut 330,000 jobs and smaller companies reduced their payrolls by laying off 284,000 people.

In related news, President Barack Obama says that he believes that a quick, negotiated bankruptcy is the most realistic and likely way for General Motors Corp. to restructure itself, and to become a competitive automaker. He also said that he is prepared to let Chrysler LLC go bankrupt and to be sold off piecemeal if it’s unable to form an alliance with Fiat SpA.

If GM files for bankruptcy it will mark the fall of a corporate symbol that in 1962 controlled 51% of the domestic car market, and in 2004 posted a $2.8 billion profit, after which it all went wrong and it posted losses of $82 billion in the last four years.

The American consumer cut back so much during the last quarter of 2008, that two recent reports showing that a slight leveling off had occurred in February and March caused many supposed economic pundits to suggest that a bottoming out had occurred and that it was possible to see a light at the end of the tunnel.

The cause for such jubilation?

The Commerce Department announced a rise of 0.2% in consumer spending in February, and the University of Michigan’s index of consumer confidence edged up slightly in March, whilst remaining at near historic lows.

Richard T. Curtin, who has run the University of Michigan survey for decades, said in a just published report, “The good news is that the free fall in confidence has ended. The bad news is that consumers expect their financial situation to remain dismal for the rest of 2009″.

Not only were the increases miniscule, but there were obvious reasons for them. Spending was higher due to higher gasoline prices, and the fact that personal income fell by 0.2% in February got scant attention, even though it most likely means that consumers will have to cut back even further on purchases.

House prices are still falling, the stock market is way down for the year and unemployment continues to rise, but there are a number of economists who believe that consumers who are still delaying the purchase of major items such as a house, a car, or new appliances will soon be forced into buying them, which will in turn create a bounce in the broader economy.

It is totally unclear to me however why the consumer will suddenly feel that he must buy a new car, a new house or a new appliance etc. and I would strongly agree with Howard Davidowitz, who is the chairman of the retail consultancy Davidowitz & Associates who said, “When you’ve got exploding job losses like we have, how would that lead to any improvement in consumer spending? If you don’t have jobs, you cannot possibly have a change in psychology”.

Perhaps ironically, if the consumer’s confidence and appetite do grow, it could well create new problems because the purchasing of big-ticket items in large numbers could create a snap-back in gross domestic product, followed by another recession because of business conditions that are still extremely weak, companies that are still not investing, and weakness in the rest of the world’s economies.