Don’t Worry: Thursday’s Jobs Report Will Save the Day

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If you really wanted to, you could come to some dire conclusions regarding the health of the U.S. job market after this morning’s jobs data.

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The fact that the so-called Challenger job cuts figure (the number of planned layoffs, as tallied by human resources consulting firm Challenger, Gray and Christmas) reached a multiyear high June reading of nearly 45,000 jobs is daunting.

And it’s a figure made even more daunting by the fact that year-to-date total of 288,000 layoffs is running 17% higher than the year-to-date figures at this time last year.

Funny thing about the Challenger jobs report, though: When you really start to look at all the relevant data — including this morning’s ADP report regarding private-sector jobs — it’s difficult to be a pessimist.

Wednesday’s Jobs Report Summary

Just in the interest of perspective, there’s no denying the job market is less than ideal right now. People are far more likely now to be employed than they were in 2009, though a significant number of people remain underpaid, or are forced to work part-time and/or work two part-time jobs because full-time work simply isn’t available.

The labor market is firming up, however, as evidenced by the relevant data as a whole.

Admittedly, the planned-layoff figure cited in the Challenger jobs report mars the overall picture … sort of. But looking at Challenger’s numbers on their own, a few questions arise.

The chart of the Challenger layoff plans below tells the tale. Yes, the 44,842 people that the consultant reckons are about to lose their jobs is higher than last month’s level, and higher than the June 2014 total of 31,343.

Jobs report: Challenger job cuts

What this morning’s jobs report didn’t explain adequately, though, is that the total planned layoffs from June of last year were unusually low, exaggerating last month’s rise.

Something else the Challenger layoff data couldn’t explain emphatically enough: A huge chunk of the recent layoffs are coming from the energy sector, which is still in the throes of a secular recession. These soon-to-be-former employees must still be absorbed by the population’s working/not-working stratifications, but it still would be wrong to conclude the broad economy is fighting a headwind in terms of joblessness.

Indeed, shortly after Challenger reported June’s total planned layoffs figure, payroll processor ADP countered with an encouraging snapshot of private payroll growth for June.

All told, ADP jobs report said the U.S. added 237,000 new private sector jobs last month, versus 201,000 new private sector jobs created in May. Moreover, we’ve seen steady monthly job growth since late-2009, with the monthly average broadly inching higher that whole time.

Jobs report: ADP private payroll growth

Other Bullish Clues

While not released today, other recent data underscores the notion that although not perfect, the employment situation is getting better.

One of those clues is the ratio of unemployed people per posted job opening, It hit a multiyear low of about 1.6 in April, after the number of posted open positions soared to a record high of 5.38 million.

Another hint is rising wages.

A lack of (meaningfully) improving income has been one of the core arguments against the notion of an improving labor market. And for a while, it held water. Even that picture is changing now, though. While disposable incomes slipped in 2013 on a year-over-year basis, we’ve seen positive growth every quarter since the first quarter of 2014. This is commensurate with broad economic growth.

Jobs report: Disposable income growth

While wage growth has been merely mediocre since 2010, it might be on the verge of accelerating in the latter half of 2015. The recent report indicating a multiyear low number of unemployed people compared to the total number of job openings suggest employers are going to have to start paying more to secure the talent they need.

Looking Ahead to Thursday’s Jobs Report

Of course, none of this data holds quite as much wait as the big enchilada: the Department of Labor’s monthly jobs report, which not only tells us the number of public- and private-sector jobs added for the previous month, but gives us the bottom-line unemployment rate.

The charts of both data sets suggest the same as most of the data dissected already. That is, the jobs picture is improving, even if not by leaps and bounds.

Jobs report: Unemployment rate and private payroll growth

Economists are expecting to hear the unemployment rate has fallen to 5.4% and that we added 225,000 new private sector jobs when we get the Department of Labor’s jobs report for June on Thursday morning. Those numbers would simply extend a bigger, mostly-progressive bigger trend.

In any case, were it one or two of these hints boding bullishly, it would be easy to dismiss them as flukes or “massaged” numbers. The truth can’t be hidden by every single measure, though.

In other words, you can ignore the dire spin on the Challenger planned-layoffs figure today. It’s the outlier. Thursday’s data from the DOL isn’t apt to change this reality.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/07/adp-jobs-report-june/.

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