Private-sector employment increased by 217,000 from January to February on a seasonally adjusted basis, according to the latest ADP National Employment Report released today. The estimated change of employment from December 2010 to January 2011 was revised up to 189,000 from the previously reported increase of 187,000. This month’s ADP National Employment Report suggests continued solid growth of nonfarm private employment early in 2011. The recent pattern of rising employment gains since the middle of last year was reinforced by today’s report, as the average gain from December through February (217,000) is well above the average gain over the prior six months (63,000).
The fears of a jobless recovery may be receding but the US economy has a long way to go before pre-recession employment levels are achieved. As we stated previously the economy needs to create over 200,000 jobs per month for 48 consecutive months to achieve pre-recession employment levels. The six month average of 63,000 is still well below the required rate of job creation for a robust recovery to occur. The Unemployment Rate still exceeds 9%.
The February report is encouraging because it points to an accelerating pace of job creation. The post Christmas season employment surge represents a 30,000 job gain over January’s strong report that triples the six month moving average. The service sector accounted for over 200,000 of the job gains. The manufacturing and goods producing sector combined to create 35,000 jobs. Construction continues to mirror the moribund housing market shedding an additional 9,000 jobs during the month. The construction industry has lost over 2.1 million jobs since its peak in 2008.
The robust recovery in the service sector is welcomed but sustainable economic growth can only be achieved by a robust turn around in the goods producing and manufacturing sectors. Service sector jobs offer lower wages, tend to be highly correlated to retail consumer spending and positions are often transient in nature. Small and Mid-Sized Enterprises (SME) is where the highest concentration of service jobs are created and the employment figures bear that out with SMEs accounting for over 204,000 jobs created during the month of February.
Large businesses added 13,000 jobs during the month of February. The balance sheets of large corporations are strong. The great recession provided large corporates an opportunity to rationalize their business franchise with layoffs, consolidations and prudent cost management. Benign inflation, global presence, outsourcing, low cost of capital and strong equity markets created ideal conditions for profitability and an improved capital structure. The balance sheets of large corporations are flush with $1 trillion in cash and it appears that the large corporates are deploying this capital resource into non-job creating initiatives.
The restructuring of the economy continues. The Federal stimulus program directed massive funds to support fiscally troubled state and local government budgets. The Federal Stimulus Program was a critical factor that help to stabilize local government workforce levels. The expiration of the Federal stimulus program is forcing state and local governments into draconian measures to balance budgets. Government employment levels are being dramatically pared back to maintain fiscal stability. Public service workers unions are under severe pressure to defend employment, compensation and benefits of workers in an increasingly conservative political climate that insists on fiscal conservatism and is highly adverse to any tax increase.
The elimination of government jobs, the expiration of unemployment funds coupled with rising interest rates, energy and commodity prices will drain significant buying power from the economy and create additional headwinds for the recovery.
The principal macroeconomic factors confronting the economy are the continued high unemployment rate, weakness in the housing market, tax policy and deepening fiscal crisis of state, local and federal governments. The Tea Party tax rebellion has returned congress to Republican control and will encourage the federal government to pursue fiscally conservative policies that will dramatically cut federal spending and taxes for the small businesses and the middle class. In the short term, spending cuts in federal programs will result in layoffs, and cuts in entitlement programs will remove purchasing power from the demand side of the market. It is believed that the tax cuts to businesses will provide the necessary incentive for SME’s to invest capital surpluses back into the company to stimulate job creation.
The growing uncertainty in the Middle East and North Africa is a significant political risk factor. The expansion of political instability in the Gulf Region particularly Iran, Egypt and Saudi Arabia; a protracted civil war in Libya or a reignited regional conflict involving Israel would have a dramatic impact on oil markets; sparking a rise in commodity prices and interest rates placing additional stress on economic recovery.
Political uncertainty tends to heighten risk aversion in credit markets. The financial rescue of banks with generous capital infusions and accommodating monetary policies from sovereign governments has buttressed the profitability and capital position of banks. Regulatory uncertainty of Basel III, Dodd-Frank, and the continued rationalization of the commercial banking system and continued concern about the quality of credit portfolios continue to curtail availability of credit for SME lending. Governments are encouraging banks to lend more aggressively but banks continue to exercise extreme caution in making loans to financially stressed and capital starved SMEs.
Highlights of the ADP Report for February include:
Private sector employment increased by 217,000
Employment in the service-providing sector rose 202,000
Employment in the goods-producing sector declined 15,000
Employment in the manufacturing sector declined 20,000
Construction employment declined 9,000
Large businesses with 500 or more workers declined 2,000
Medium-size businesses, defined as those with between 50 and 499 workers increased 24,000
Employment among small-size businesses with fewer than 50 workers, increased 21,000
Overview of Numbers
The 202,000 jobs created by the SME sectors represents over 90% of new job creation. Large businesses comprise approximately 20% of the private sector employment and continues to underperform SMEs in post recession job creation. The strong growth of service sector though welcomed continues to mask the under performance of the manufacturing sector. The 11 million manufacturing jobs comprise approximately 10% of the private sector US workforce. The 20 thousand jobs created during February accounted for 10% of new jobs. Considering the severely distressed condition and capacity utilization of the sector and the favorable conditions for export markets and cost of capital the job growth of the sector appears extremely weak. The US economy is still in search of a driver. The automotive manufacturers have returned to profitability due to global sales in Latin America and China with a large portion of the manufacturing done in local oversea markets.
The stock market continues to perform well. The Fed is optimistic that the QE2 initiative will allay bankers credit risk concerns and ease lending restrictions to SMEs. A projected GDP growth rate of 3% appears to be an achievable goal. The danger of a double dip recession is receding but severe geopolitical risk factors continue to keep the possibility alive.
Interest rates have been at historic lows for two years and will begin to notch upward as central bankers continue to manage growth with a mix of inflation and higher costs of capital. The stability of the euro and the EU’s sovereign debt crisis will remain a concern and put upward pressure on interest rates and the dollar.
As the price of commodities and food spikes higher the potential of civil unrest and political instability in emerging markets of Southeast Asia, Africa and Latin America grows. Some even suggest this instability may touch China.
The balance sheets of large corporate entities remain flush with cash. The availability of distressed assets and volatile markets will encourage corporate treasurers to put that capital to work to capitalize on emerging opportunities. The day of the lazy corporate balance sheet is over.
Solutions from Sum2
Credit Redi offers SMEs tools to manage financial health and improve corporate credit rating to attract and minimize the cost of capital. Credit Redi helps SMEs improve credit standing and demonstrate to bankers that you are a good credit risk.
For information on the construction and use of the ADP Report, please visit the methodology section of the ADP National Employment Report website.
You Tube Video: John Handy, Hard Work
Risk: unemployment, recession, recovery, SME, political
When Joe Wilson belched his infamous catcall “lair” during President Obama’s address to a joint session of the legislature, he revealed himself to be a poor example of a mature adult. Puddenhead Wilson’s emotional outburst may have played well with die hard Obama haters, indeed the next day his campaign war chest swelled by a million dollars; but it also sent a terrible message to America’s youth that its acceptable to disrespect your teachers, coaches, police officers or parents if you disagree with what they are saying. The fact that his campaign coffers swelled with contributions as a result of his offense compounded the power of the negative message it sent to youths and to the perpetrator himself. Awarding Puddenhead Wilson for his bad conduct only encourages him to repeat his offensive disrespectful behavior. It also sends a very poor message to America’s youth that bad behavior is OK and childish emotional outbursts may in fact find reward from enabling adults.
New Jersey Governor and emerging GOP superstar Chris Cristie, recently revealed himself to be a poor role model for the youth of America when he told a gathering of students that teachers greed was to blame for the lack of supplies and educational resources available for public schools. The Governors injection of politics into his presentation to Trenton students is a bit ironic. In his crusade against the teachers union, Christie has charged educators with using school children as “drug mules” to carry the message about the danger of funding reductions for public education. It would seem that the good Governor Christie needs to deliver a couple of kilos of his own to his adoring fans in the Tea Party and his financial backers in the GOP.
Putting partisan politics aside Christie’s message to public school students is extremely damaging. The public schools are under incredible pressure. All social institutions are engulfed in severe challenges and are fully engaged in crisis management mode. America’s public schools are not exempted from these pressures. The complex confluence of political, cultural and economic factors plaguing society are acutely manifested and constantly working to undermine the public school system. Governor Christie’s political rant to students throws gasoline on a combustible pile of institutional challenges confronting teachers and administrators. Like Puddenhead Wilson, the Jersey Doughboy gives tacit approval and encouragement for students to question the authority and motives of their teachers. Christie has just provided under-performing students a ready made excuse for failure and disruptive malcontents a lit match to throw onto a gasoline soaked pile of kindling encircling our public schools.
Christie’s partisanship places the context of his egregious mismanagement of the Race to the Top DOE grant in a new light. Perhaps Christie’s $400 million blunder was an intentional action to reduce resources to the public schools to undermine greedy teachers and their gluttonous union. Why would Christie enable the funding of whip cracking greed driven drug mule drivers? And like his killing of the DOT funded ARC tunnel project, Christie enhances his conservative street cred by punching the construction unions in the nose and telling the socialist government in Washington to spend its money elsewhere.
Like Puddenhead Wilson, Christie is cashing in on his actions and is building a nice portfolio of economic and political capital for himself. His remarks about the greedy teachers provide a convenient cover and solemn absolution for the grand practitioners of greed and avarice that have led this country to the brink of fiscal insolvency, cultural destitution and political bankruptcy. Christie’s narrative of blaming the needy plays well with large contributors who will be moved to put good 527 Corporation resources at his disposal to underwrite his political rise.
Christie’s midterm election barnstorming tour in service to the GOP booked him on a coast to coast tour that even his hero Bruce Springsteen would envy. Though Christie’s mojo clearly failed in helping Meg Whitman and Carly Fiorina win election, the Jersey Doughboy’s political stock has risen so quickly that he felt compelled to send out a few tweets to deny he would run on a ticket with Sarah Palin for president in 2012.
So New Jersey is stuck with the doughy mess of big money winner take all partisan politics of Christie’s ideologically driven governorship for at least the next two years. Enjoying popular support for now, Christie’s considerable body mass currently displaces enough water to ride the wave of Tea Party conservatism. But if the fickle citizens of New Jersey make a slight left turn off Exit 16E on Thunder Road, Christie’s fortunes will drop faster then a lead sinker placed into the rancid brew seeping to perfection in a gaudy Royal Dalton Tea Pot.
You Tube Music Video: Bruce Springsteen, Born to Run (Live Acoustic Version)
Risk: political, labor unions, public education, consensus
Michelle Bachmann recently advanced the idea that the new congress needs to go to Washington with a hand full of subpoenas to fully uncover and punish the criminal behavior of the Obama Administration. Why does she want to do this? Why does the Chairwoman of the Republican Tea Party Caucus think this is a good idea?
During President Clinton’s second term the GOP’s extreme partisanship led to impeachment proceedings and severely hampered the effectiveness of our government and its Chief Executive. This distraction may have made some political hay for Republicans but crippled our Chief Executive’s ability to focus on and deal with the growing terror threat Al-Qaeda was preparing to launch against our country. The GOP’s actions provided support, aid, cover and comfort to the terrorists and heightened our country’s vulnerability to attack. Perhaps we should investigate their activities and motives for effectively becoming a Fifth Column for the Evil Doers?
Earlier in the year, Ms. Bachmann’s suggested to Chris Matthews that we should investigate the UnAmerican activities of congress and senate members to root out and expose those who hate America and are actively working for its destruction. I’m not so sure about this; it may lead to the mass imprisonment of the Republicans who obstructed President Clinton’s ability to perform his duties as Commander and Chief. With the GOP gone it would be impossible to form a consensus to effectively govern the nation so I’m kinda lukewarm on this one. After all President Obama and the ruling democrats rely on the good will of the loyal opposition GOP party to show the country that democracy works and that we can all get along.
But because I don’t think Ms. Bachmann’s idea is a good one doesn’t make it bad. After all I’m coming from a pretty partisan place myself. So in the spirit of consensus building I’m trying to understand why she would propose such a thing. Though its a dangerous and scary place to visit, I have tried to get inside Ms. Bachmann’s mind to understand her reasoning why she thinks the congress should spend the next session investigating members for crimes against the republic.
I have comprised a list of 13 reasons as to why Michele Bachmann and the Tea Party may think this is a good idea for the country. Please feel free to add your own.
1. Because its fun to shut the Federal Government down (ask Newt Gingrich)
2. It will heighten partisanship to levels yet unseen
3. Obstructionism is their preferred style of governance
4. Dissent is dangerous to a democracy
(America is long over due for another round of McCarthyism)
5. Enemy combatants sitting in congress must be imprisoned
6. It will demonstrate reactionary street cred
7. Sean Hannity thinks its a good idea
8. Rush Limbaugh thinks its a great idea
9. Glenn Beck tearfully pleads to show no quarter to “Wilsonian Reprobates”
10. Compromise/consensus forming is for sissies
11. Its how Michele Bachmann Mans Up and shows her pair
12. It plays well on Talk Radio and to the rabid dogs in the TP howling for fresh meat
13. 2012 GOP can say we did our best under trying circumstances now give us the White House and Senate. We’ll finish the job. Rove calls it the Coup de Grace campaign. A final silver bullet to the head of the democrats, democratic consensus and Federalism paid and financed by serious 527 money.
You Tube Video: Edvard Grieg, In the Hall of the Mountain King
Risk: consensus, governance, democracy
We thank you for your activism and energy. We thank you for the passion. We thank you for your professed love of country. We thank you for showing us how to spend the piles of corporate money on disgusting attack ads in service to our great democracy. We thank you for reminding us that the US Constitution is America’s most precious asset even if you sometimes miss the point about what it actually says.
We thank you for returning the country back into the hands of the GOP. After two years of living under the fascist hell of the dictatorial regime of Barack Obama the endurance of the people could suffer it no longer. We long to enjoy the freedoms that tax cuts for the rich, corporations freed from regulatory shackles and the old time religious revival of laissez-faire capitalism offers as the only way to assure the social uplift of all citizens.
The GOP thanks the Tea Party for returning the country to their control. The GOP appreciates the Tea Partys expeditious return to their local districts so Republicans can get on with the serious business of government. The serious business of government is working seriously with serious business people with serious money to address the serious problems of these serious constituents. In all seriousness the GOP will tirelessly labor to solve the serious problems for these serious constituents.
The nation thanks you for the lively political theater you presented during the election. Your eccentric cast of characters,dressed like Nazi enacters,wacky witches, militant militiamen, Adolph Hitler lookalikes and long dead patriots in tri-corner hats added some much needed levity to the weighty matters confronting the nation.
We thank the Tea Party by supporting a field of candidates that had the courage to publicly speak their convictions to raise the specter of prejudice and fear. The Tea Party’s religio-political fundamentalism raised the fear bar to heights that dwarfed even the three lanterns glowing in the Old North Church. Like Paul Revere before them, Tea Party patriots road across the land alerting kin and countrymen to the dangers of secularism, recalcitrant Islam, liberal government, homosexuality, Charles Darwin and evolution, foreigners or any Mexican immigrant idling too close to our southern borders.
The Tea Party has given us pause to reconsider our addiction to caffeine fueled government spending and a lavish lifestyle and choice of coffee as national drink. If you pardon the French, chai is now the preferred brew du jour. So with pinky up we lift a tiny cup to celebrate the day by swilling a mouthful of Red Rose with the fervor of an Afghani, Ottoman or Brit.
Thank you Tea Party. Thank you.
You Tube Music Video: Sly and the Family Stone: Thank You For Letting Me Be Myself Again
Risk: consensus, political, pluralism