ADP has released its National Employment Report for May. Non-farm private employment increased 55,000 during the month on a seasonally adjusted basis. ADP also reported an upward revision of 33,000 jobs for March, bringing the number of new jobs created during the month to 65,000. The three consecutive net employment gains reported by ADP indicates that while the number of new job creation remains modest, positive momentum is developing.
A stabilized labor market is a key ingredient to a sustained economic recovery. The economy lost over 9 million jobs during the recession and recovery will require the creation of 200,000 new jobs per month for the next 4 years to get back to pre-recession employment levels. Last years massive Federal stimulus programs directed funds to state and local governments to help stem layoffs. The expiration of those programs will force fiscally challenged local governments to resort to austerity measures that will require the public sector to trim jobs.
Macroeconomic factors continue to be challenging the economic recovery. The sovereign fiscal crisis in Europe, slowing growth in China, tepid credit markets and political uncertainty counterbalance the positive effects of a stabilizing housing market, low interest rates and benign inflation.
The economic impact of the Gulf oil spill will not be confined to the region. The local aqua-cultural industries, fishing and tourism to the region has been immediately impacted by the spill. A prolonged duration of the event will have a profound impact on the economies of the entire Caribbean. The economies and fiscal stability of American cities such as Pensacola, Mobile, Tampa, New Orleans and Key West are directly threatened by the unfolding events. Cities and regions along the Texas Coast and Mexico also remain remain at risk and share the unfortunate distinction of being in the probability cross hairs of suffering extreme toxic damage as a result of a hurricane. Shipping lanes and the closure of ports due to oil contamination could impact America's vital agricultural industry. The moratorium on deep water drilling has placed pressure on the oils services sector and may impact the industries long term financial health. The impact on the price of oil and refined petroleum products remains to be seen.
Highlights of the ADP report include:
Estimates non-farm private employment in the service-providing sector increased by 55,000.
Employment in the goods-producing sector declined 23,000
Employment in the manufacturing sector rose 15,000
Employment in the services sector rose 78,000.
Large businesses with 500 or more workers added 3,000 jobs
Medium-size businesses, defined as those with between 50 and 499 workers increased by 39,000
Employment among small-size businesses with fewer than 50 workers, increased by 13,000
Overview of Numbers
The net gain of 52,000 jobs in the small and mid-sized enterprise (SME) sector, compared to the creation of 3,000 jobs in large enterprises is a telling statistic about the changing topology of the US job market. During the past decade, a large proportion of job growth occurred in the public and small mid-size enterprises (SME) sector. Large businesses have led the way in implementing lean enterprises and have outsourced and off shored many jobs and business functions to accomplish this. Job creation by SME's during the past month represented over 90% of new job creation. America's reinvention and economic renaissance must be led by the SME sector. It is vital that capital formation initiatives and credit availability is positioned to foster the growth and development of the SME sector.
This months ADP report is an indication that the US economy continues at the bottom of an extreme down economic cycle. The danger of a double dip recession unfortunately still lurks as a possibility. The oil spill in the Gulf of Mexico, the potential of market contagion from EU credit distress, China's slowdown and the anemic rate of job creation in the wake of massive government expenditures and budget deficits presents continuing challenges to a sustained and robust recovery in the United States.
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For information on the construction and use of the ADP Report, please visit the methodology section of the ADP National Employment Report website.
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Risk: unemployment, recession, recovery, SME