Conflicting Labor Reports

This Friday we’ll get another addition of the monthly employment report produced by the Bureau of Labor Statistics that is heavily scrutinized by investors trying to gauge the pulse of whether the economy is improving or not. But the government’s report isn’t the only jobs barometer that investors watch, and today brought two employment updates from the private sector that issued diverging signals.

First up was the Challenger/Grey Report, which tracks the number of corporate layoffs, and is known to be one of the few employment reports that is free of seasonal biases. Today’s report showed that February’s planned firings increased 20% on a year over year basis, with federal, state and local governments leading the charge. This is not great news, and with all the focus on budgetary problems at the state and federal level, perhaps this is a warning of building pressure in that part of the labor market.

The other report out today was the ADP National Employment Report that is constructed using actual payroll data. The estimate for today was an increase of approximately 180,000 jobs, but the number came in better than expectations at 217,000.

Our view on jobs at Pinnacle has been that jobs are in the middle of a slow structural repair phase, but that the cyclical profile is improving. I don’t think today’s data changes anything to that outlook, but we’ll have to keep a close on the Challenger/Grey data to make sure that one month of data doesn’t develop into a malignant trend.