Employment picture slowly improving

ADP employment rose 32,000 in April, in line with consensus expectations. March ADP employment was upwardly revised to +19,000 from an initially reported -23,000 (with the revisions, ADP employment has now reported gains for three straight months).

Service-producing employment rose 50,000 in April (also the third consecutive increase), however, employment in the goods-producing sector dropped 18,000 (nonetheless, this equals January 2008 as the smallest decline in goods-producing jobs since June 2007). Manufacturing employment rose 29,000 in April, construction employment dropped 49,000 and financial services jobs fell by 14,000.

BOTTOM LINE: This report is another indicator that labor market conditions are gradually improving. We expect Friday’s payrolls report to show a more moderate increase in private payrolls (of around 50,000) than that seen in March, since March employment appears to have been boosted by a weather-related rebound. However headline payrolls should have been significantly boosted by hiring related to the 2010 Census, a factor that does not affect ADP employment.

CHALLENGER LAYOFFS

Challenger reported that the rate of layoff announcements slowed significantly in April with 38,326 job cuts announced compared to 67,611 in the prior month. Layoff announcements in April 2010 were 71.1% below April 2009’s level (the data are not seasonally adjusted).

BOTTOM LINE: Layoff announcements in the private sector have fallen to the lowest levels in a decade, which suggests that initial unemployment claims will trend lower over the next few months. Challenger reported that layoff announcements in April were led by state and local governments, many of which are facing budget problems (note that while private payrolls fell 8.3 million since the start of the recession, state and local employment was flat).

Source RDQ

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