The pace of employment cuts in the service sector is accelerating.
It's difficult to discern given the incessant headlines lamenting the dearth of skilled workers, but something is amiss in the powerhouse U.S. services sector, which accounts for some 80 percent of the economy.
The headline figures say very little. The Institute for Supply Management's April survey of non-manufacturing industries showed that activity slowed for a third consecutive month, dropping its index to the lowest since December. Still, at 56.8 the index is materially higher than the 50 mark that is the dividing line between expansion and contraction. Moreover, all 18 industries surveyed by ISM saw growth last month.
By the looks of things, the service sector is in fine shape. As the ISM itself said, “Overall the respondents remain positive about business conditions.” But there was this caveat: “The respondents have expressed concern regarding the uncertainty about tariffs and the effect on the cost of goods.”
The April jobs report from the ADP Research Institute was noteworthy in that the services sector created the fewest jobs since November. And the U.S. nonfarm payrolls data show service sector job growth has averaged just 135,000 over the past six months, a marked slowdown from 2016's monthly average of 170,000. As for what the future holds, take a look at the Challenger, Gray & Christmas monthly survey data. It showed that in the first four months of this year, employers announced 176,460 job cuts, an 8.4 percent increase from the 162,803 reported in the same period of 2017.
It would be easy enough to assign all of the blame to the retail sector. There is ample evidence that the bloodshed in this sector continues. Some 64,370 job cuts have been announced this year thus far, a 28 percent jump over 2017. According to Challenger's tracking, 2,460 retail stores have closed this year on top of the 9,241 that shuttered in 2017. But the story is broader than one sector. Health Care/Products job cuts total 17,450 this year, up from 11,269 over the same period last year. It's key to note that the trend in this sector has accelerated in recent months. Meanwhile, the service sector announced 14,665 cuts, up from 8,263 last year.
