Friday, May 8, 2009

Small and medium firms are slashing most of the jobs

This week is labor week -and stress test week, but I will let you read about that here, here, here or here - the Fed's white paper)! In preparation of the BLS report, I wanted to talk a little bit about the almost-discredited ADP report. Although the ADP report touts a correlation of 0.96 with the BLS report, it seems to add little predictive power for the BLS nonfarm payroll report. Calculated Risk argues the correlation is strong only after revisions.

However, the ADP report does add value: it reports the job loss by firm size. This is different from the BLS breakdown, which is by industry.

The chart illustrates monthly contributions to total payroll growth by size of firm: large, medium, and small, which account for 17%, 39%, and 44% of the total private payroll, respectively. In the first quarter of 2008, large firms contributed the largest share to the payroll decline; however, since July 2008, it is the medium-sized firms (50-499 employees) that are contributing to the bulk of the payroll decline.

However, the announced layoffs are all at the large firms, which is tracked by Forbes:
But the ADP report suggests that this is only the tip of the iceberg: the hemorrhaging of jobs is occurring largely (no pun intended) across the small- and medium-sized firms.

Rebecca Wilder

2 comments:

  1. And so many of those high-paying construction jobs have gone bye-bye... There, that should raise the ratio a bit for 2009. Seriously, it has been ever thus and the glass ceiling is still there. Did you see where the women presidents of colleges/universities have been rewarded anonymously? Not a direct raise for them but it doesn't hurt. Any ideas yet who that donor is?

    ReplyDelete
  2. The ADP has small firms accounting for a much larger share of employment that the Census-Small Business Administration data.

    The Census-SBA show that small business accounting for about 50% of employment while ADP has a much larger number. It makes me suspicious of the ADP report.

    Remember, while small business normally create more jobs than large firms they also normally destroy more jobs. Thus, their share of employment has not changed much over the years.

    ReplyDelete