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:

• May 7: Cummins ( CMI - news - people ) idles Indiana plant that supplies Chrysler and lays off 610 workers.
• May 7: DuPont ( DD - news - people ) adds to December job cut of 2,500 with another 2,000-employee cut.
• May 6: Wells Fargo ( WFC - news - people ) freezes pension plans and fires 548 in North Carolina.
• May 5: Microsoft ( MSFT - news - people ) pink-slips a second 5,000 employees following its initial January layoff.
• May 5: Allstate ( ALL - news - people ) closes claims office in Florida and lays off 66 employees.
• April 28: On top of 1,850 layoffs announced in January, Clear Channel ( CCU - news - people ) slashes 590 jobs, bringing cuts to 12% of its original workforce total.

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