PRINCETON, NJ -- Gallup's Net New Hiring Activity measure fell by 2.2 percentage points in May after a 1.1-point drop from March to April, matching the 2.1-point drop between January and February -- the largest previous decline this year.
More Job Losses in May
Wednesday morning, Challenger, Gray & Christmas -- a private placement firm that monitors and reports on layoff activity each month -- reported that firings announced by U.S. companies totaled 103,522 in May -- the highest number of layoffs in more than two years. Just 45 minutes later, ADP reported that the private sector added 40,000 jobs in May, up from 13,000 jobs in April. The Bureau of Labor Statistics has reported that the U.S. lost 260,000 private- and public-sector jobs during the first four months of this year and is due to report its results for May on Friday.
Gallup's Net New Hiring Activity declined markedly from April to May, suggesting that the U.S. economy suffered significant job losses last month. At the same time, the current decline is less pronounced than the 3.6-point decline indicated by the preliminary Net New Hiring Activity estimate Gallup released a couple of weeks ago based on results for the first two weeks of the month. The data still indicate there were job losses in May, but these will not be as pronounced as seems to have been the case just a couple of weeks ago.
Gallup's Net New Hiring Activity measure was initiated in January 2008. It is an effort to assess U.S. job creation or elimination based on the self-reports of more than 8,000 individual employees each month about hiring and firing activity at their workplaces. In order to calculate this measure, Gallup asks current full-time employees whether their employers are hiring new people and expanding the size of their workforces, not changing the size of their workforces, or letting people go and reducing the size of their workforces. Net new hiring activity is computed by subtracting the "letting go and reducing" percentage from the "hiring and expanding" percentage. The assumption is that employees across the country have a good feel for what's happening in their companies, and that these insider perceptions can yield a useful summary indication of the nation's job situation.
Over the first five months of this year, the percentage of employees saying their companies are hiring has fallen from 39.8% in January to 38.1% in April and 36.8% in May. At the same time, the percentage of employees reporting that their firms are letting people go increased from 13.7% in January to 15.5% in April and 16.4% in May. The April to May drop in net new hiring activity of 2.2 points is essentially the same as the large decline that took place between January and February.
Net New Hiring Activity by Region
On a regional basis, the East has suffered the most from the recent financial crisis, with many financial services firms announcing layoffs. The 7.2-point decline in net new hiring activity between January and May in the East reflects the significant impact on employment that has taken place. In fact, the 2.4-point decline of May reflects the continuing fallout from the credit crisis on employment.
Net new hiring activity in the Midwest fell by 4.5 points from April to May, reflecting the continued job stress in this region of the country. The percentage of employees reporting that their companies were hiring declined from 38.0% in April to 35.7% in May. At the same time, the number saying their companies were letting people go increased from 14.9% to 17.1%.
Net new hiring activity has fallen steadily in the South. This trend continued in May, with a 2.4-point drop from April. The percentage of employees saying their companies were hiring fell below 40% for the first time this year in May, while the percentage reporting employers were letting people go exceeded 15%.
Net new hiring activity in the West has fallen by 5.0 points between January and May. However, the May results actually show a slight improvement of 0.5 points when compared to April.
Does Bernanke Know Something Consumers Don't?
On Tuesday, Federal Reserve Board Chairman Ben Bernanke told an economics conference in Spain by way of satellite that the Fed is concerned about the declining value of the U.S. dollar and its potential impact on inflation and inflationary expectations. Many on Wall Street interpreted his comments as a signal that the Fed will not be cutting interest rates further this year, and may end up increasing them later as the year's end approaches.
It may be that a strong Fed stance in support of the U.S. dollar, particularly if fully supported by the Treasury, would help lower commodity prices in general, and oil prices in particular. This would be good news for the consumer and the U.S. economy. An effort to bolster the U.S. dollar and even higher interest rates would also make sense, assuming the economy is going to strengthen as the year progresses.
Right now, however, such an optimistic scenario for the second half of 2008 is hard to envision. The consumer is being squeezed not only by gas prices -- up 27% from this time a year ago -- but also by surging food prices, falling housing prices, and an underwriting-driven credit crunch. If Friday's jobs report shows continuing job losses for the U.S. economy, as Gallup's Net New Hiring Activity measure suggests, it is hard to see how the economy could strengthen in the near term.
On the other hand, perhaps Chairman Bernanke has some special insights into the labor market and is anticipating a stronger-than-expected growth of jobs in May. While that would not comport with the Gallup and Challenger measurements -- or with current low consumer confidence levels or the seeming lack of a significant consumer spending boost because of the federal tax rebates that just over 30% of consumers report having received -- it would certainly help bolster the case that the economy is stronger than many Americans currently perceive. Of course, whether such a surprisingly strong government report on the jobs market, if it happens, would be more illusory than real might end up being worthy of debate.
Gallup is interviewing no fewer than 1,000 U.S. adults nationwide each day during 2008. The economic questions analyzed in this report are asked of a random half-sample of respondents each day. The results reported here are based on combined data of more than 8,000 interviews each in January, February, March, April, and May. For results based on these samples, the maximum margin of sampling error is ±1 percentage point.
Interviews are conducted with respondents on land-line telephones (for respondents with a land-line telephone) and cellular phones (for respondents who are cell-phone only).
In addition to sampling error, question wording and practical difficulties in conducting surveys can introduce error or bias into the findings of public opinion polls.
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