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What's Behind the Dismal Jobs Picture

An increase in layoffs may be the culprit behind the weak employment picture, rather than a decrease in hiring.

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Goldman Sachs economists, in a note, point to data from the Bureau of Labor Statistics that shows the lack of jobs growth in May was caused mainly by more layoffs, rather than a reduction in hiring. Monthly employment data released Friday was revised to show that a total of just 25,000 non farm payrolls were added in May, and that just 18,000 were added in June.

They note the Job Openings and Labor Turnover Survey reportshowed that during May, hiring increased by 64,000 while non-layoff separations, or people quitting positions or retiring increased by 39,000. "Private payroll growth actually decelerated by 168,000 (from 241,000 to 73,000) because of an increase in layoffs: private sector gross firing activity increased by 194,000 in May, the largest month-over-month increase in a year," they wrote.

The survey data for June will not be available until August. The economists note that the June employment report showed the number of people unemployed for less than five weeks was elevated in June, and that could signal layoffs was a factor in the June jobs report.

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The next jobs related data is Thursday's weekly jobless claims, expected to stick at about the recent 420,000 level. Claims have been elevated for more than two months. "Confirmation shows that layoffs have increased has implications for how we read the weekly jobless claims statistics. In particular, the fact that claims remain steady at around 425,000 likely means that a higher level of layoffs is still a drag on employment growth," Goldman economists wrote.

Goldman economists see a mixed message from Tuesdays' job openings report. "On the one hand, the rise in layoffs is discouraging. The fact that some businesses are shedding workers suggests they see sustained weakness in demand, rather than just a 1-2 month slow patch. On the other hand, some statistics in the report are consistent with an ongoing recovery. Most importantly, a gradual increase in quitting activity and more job openings points to greater confidence among both workers and firms," the note said.

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