Need To Know News

• November Non-Farm Payrolls are expected to plunge 340k following a 240k drop in October
• The Unemployment Rate is expected to grow to 6.9% in November from 6.5% in October

The November Employment report is expected to reflect significant labor market deterioration, with job losses expected to exceed 330k following a combined decline of 524k jobs in October and September. An as expected November drop would reflect the first decline of more than 300k since Oct-01, when payrolls fell by 325k.

The worse-than-expected November ADP data (-250k), combined with the startling jump in November Challenger Job Cuts (148.4%), suggest extensive downside risks to the November report. Potential bright spots are severely limited, as potential gains in government, education, and health employment aren’t likely to boost the headline data in a significant way.

A good portion of analysts issued downward revisions to the forecasts following the abysmal round of employment data released Tuesday. Goldman Sachs now expected November job losses to touch 400k while Mitsubishi UFJ now expects a 470k drop.

November Factory Employment is expected to drop 100k, which would be the first triple-digit decline since Jun-03 — even when factoring in the expected 35k boost from the concluded Boeing strike. Torrential declines in all major regional manufacturing indexes in November were capped off by the lowest ISM Manufacturing Index reading since 1982.

The once-proud US services sector has also deteriorated significantly over the past quarter, with private service-sector jobs dropping over 290k in September and October. Service jobs are likely to fall further in November, reflecting extensive downside risks from the much worse-than-expected drop in the private sector-biased ADP report and record drop in the November ISM Non-Manufacturing Index.

ADP dropped about 50k lower than expected at -250k and the October Figure was revised downward by 22k.  In the ISM Report, the Employment Index cratered to 31.3 from 41.5 in October.  The Headline ISM data showed contraction for the 4th consecutive month and the only component of the ISM Non-Manufacturing Index reported higher were Supplier Deliveries.  Anecdotally, respondents said Suppliers are getting very selective about who they conduct business with - a clear sign the credit crunch is spreading to the business to business area.

In short, there was nothing in the ISM data that indicated the need for hiring….in fact, more layoffs look likely.  Friday’s NFP is expected down about 330k-350k…a drop of over 400k is not unimaginable.

The November ADP Employment report is expected to reveal a more than 200k drop in employment following a 157k drop in October. This would reflect the first monthly decline of 200k jobs or more since Dec-01. Potential upside remains severely limited.

Related data:
• October ADP Employment fell by 157k following a 26k drop in September

November Challenger Job cuts are likely to tick higher following the surge to 78.9% y-o-y in October. Monthly Challenger data is sometimes subject to variability, so a lower-than-anticipated increase may not clearly reflect heightened jobs pressure in November.

Related data:
• October Challenger Job Cuts Rose 78.9% following a 32.6% increase in September

October Non-Farm Payrolls, at -240k, were sharply lower than expectations, while the September data were revised down by 125k to -284k — the worst since Nov-01. August was revised from -73k to -127k.

Of the 1.2mln jobs lost this year, more than half (651k) have been lost in the past 3 months. To put the September revision in context, the last time a headline payrolls number was revised down nearly this much was in July 1983.

The September downward revisions were in the Service Sector (-201k from -82k) and in Government hiring which was revised down to -41k from +9k.

October Manufacturing Payrolls were down 90k, double the monthly average of 2008; Goods Producing Jobs were down 132k from a downwardly revised -83k in September and -70k in August. Retail Jobs fell 38.1k bring their year total to -296k.

The Unemployment Rate shot up to 6.5% - a level not seen since March 1994.

* October Non-Farm Payrolls are expected to drop 210k following a 159k decline in September

* The Employment Rate is expected at 6.5% from 6.1% in September

* October ISM Manufacturing Employment Index: 34.6 (lowest since ‘01) vs. 41.8 prior

* October ISM-NMI Employment Index: 41.5 (all time low) vs. 44.2 prior

* October ADP Employment: -157k vs. -8k prior