ADP Report: Payroll EmploymentFell Another 522,000

In its latest National Employment Report, the payroll processor ADP indicated that private nonfarm payrolls fell 522,000 during January after a revised 659,000 decline during December. The decline was the thirteenth consecutive monthly decline and during the last three months, payrolls have fallen at a 5.6% annual rate.

Consumers' aversion to purchasing autos continued last month. U.S. sales of light vehicles fell a surprising 7.1% m/m to 9.57M (SAAR) from 10.31M during December. Sales of 10.2M had been expected for January. The latest figure was the lowest since 1982 according to the Autodata Corporation and Ward's Automotive News. (Seasonal adjustment of the figures is provided by the U.S. Bureau of Economic Analysis). The decline pulled the comparison versus a year ago to -37.7% which was its worst since the data became available in the late 1960s.

Sales of domestically-made light vehicles were particularly hard hit as they posted a 12.2% decline from December to 6.75M units. The level is now 42.4% below that in January 2008. Sales of domestically made autos fell a hard 20.8% m/m, enough to pull the comparison versus a year earlier to -43.7%. Light truck sales fell 4.6% for the month (-41.4% y/y).

Imported light vehicle sales outperformed the domestics again last month as they posted a 7.6% increase. Moreover, while sales fell 22.8% year-to-year, the decline is roughly half that for U.S. made vehicles. Sales of imported light trucks were the strongest as they increased 6.0% from January. The increase enabled sales of imported light trucks to grab 21.4% of total market share, a record and double the share of ten years earlier. Sales of imported autos also firmed and rose 8.5% (-23.0% y/y) after two months of decline.

Higher truck sales pulled import's share of the U.S. light vehicle market to a record 29.5%, up three percentage points from the 2008 average. (Imported vehicles are those produced outside the U.S. and do not include vehicles with the nameplate of a foreign manufacturer produced within the U.S.)

The chart at top shows the Yr/Yr trend in EMU consumer spending. It is working its way lower, lead by a declining trend in consumer spending plans. The Yr/Yr drops seem to have stopped to hover around the -2% pace, Yr/Yr. But the table shows that more recently downward momentum seems to have picked up. Over six months the sales volume is only lower at a 1.2% annual rate but over three-months that is down to a -4.4% pace. The drop in the pace of nonfood items has accelerated even more sharply over the recent 3-months as economic conditions have worsened. Despite some really poor consumer sentiment surveys spending in the UK is holding up. In Germany, though, conditions are poor.

The EMU Services PMIs from Market show continued weakness in EMU and UK service sectors but not accelerating weakness.

The signal for the Zone is just one month up from its low. Country indices are low in their respective ranges, but generally they are not on their bottoms. Germany for example saw its service sector slip further this month; it now lies in the bottom 10 percentile of its range. Italy and the UK each saw some of their weakness dissipate yet they remain the worst tow countries with the lowest services diffusion readings in this grouping. . The EU Commission’s measures on services and confidence are generally a bit weaker and are at or nearer all time lows compared to the Market treatment for services.

The bounce in services in Europe is echoed by the bounce in the US non-MFG ISM, the closest US measure to these European service sector indices. The US ISM is in the bottom 23% of its range. Europe and the US seem to be passing though this cycle with remarkably similar impacts on their respective goods and services sectors.

The January Composite Index for the nonmanufacturing sector from the Institute for Supply Management (ISM) rose for the second consecutive month. The rise to 42.9 raised the level to its highest since October and it was much firmer than Consensus expectations for a reading of 39.0. A level of the ISM indices below 50 indicates declining activity. Since the series' inception in 1997 there has been a 48% correlation between the level of the business activity index for the nonmanufacturing sector and the Q/Q change in real GDP for the services and the construction sectors.

The rise in the overall figure last month was led by improvement in the business activity sub-component, also its highest since October. The new orders sub-index increased as well to 41.6.

The employment index was relatively less robust and was about unchanged from December at 34.4, but that was still up moderately from the November low. Since the series' inception in 1997 there has been a 56% correlation between the level of the ISM nonmanufacturing employment index and the m/m change in payroll employment in the service-producing plus the construction industries.

Pricing power firmed as well to a reading of 42.5 which was the highest since October. Since its inception ten years ago, there has been a 60% correlation between the price index and the q/q change in the GDP services chain price index.

Beginning with the January 2008 Nonmanufacturing Report On Business®, the composite index is calculated as an indicator of the overall economic condition for the non-manufacturing sector. It is a composite index based on the diffusion indexes for four of the indicators (business activity, new orders, employment and supplier deliveries) with equal weights. The latest report from the ISM can be found here.

ISM surveys more than 370 purchasing managers in more than 62 industries including law firms, hospitals, government and retailers. The nonmanufacturing survey dates back to July 1997.

Challenger, Grey & Christmas reported that January job cut announcements soared to 241,749 following 166,348 layoffs during December. The latest figure was the highest since early-2002.

Job cut announcements in the retail industry led overall with 53,968. The industrial goods industry was not far behind with 32,083 layoffs and in the computer industry there were 22,330 job cuts. Announced were 22,063 layoffs in the pharmaceutical industry, 17,195 layoffs in the chemical industry and the electronics industry shed 11,050 jobs

During the last ten years there has been a 67% (inverse) correlation between the three month moving average of announced job cuts and the three month change payroll employment.

Job cut announcements differ from layoffs. Many are achieved through attrition, early retirement or just never occur.

Challenger also reported that announced hiring plans were up sharply from the prior three months.

The Challenger figures are available in Haver's SURVEYS database.