Recession Signs Growing: Employers Cut Jobs, Factory Orders Fall

Economists are beginning to worry that previous optimism about the U.S. economic recovery was premature.  A number of economic indicators suggest an economic slowdown, as productivity falls, factory orders decline, jobless claims rise, and employers cut more jobs at the beginning of 2016.

Less Jobs, Disappointing Jobless Claims

Economists are beginning to worry that previous optimism about the U.S. economic recovery was premature.  A number of economic indicators suggest an economic slowdown, as productivity falls, factory orders decline, jobless claims rise, and employers cut more jobs at the beginning of 2016.

Less Jobs, Disappointing Jobless Claims

Employers are cutting more jobs and more people are seeking unemployment benefits, according to two independent studies.  The Challenger Gray & Christmas Job Cuts Report saw a decline of 75,114 jobs in January after companies saw a 15-year low in job cuts in December. “Heavy downsizing in the retail and energy sectors pushed monthly job cut announcements to their highest level since last summer,” the consultancy said in a press release.

The job decline was the highest the report saw since January 2009, driven by declines at large retailers. “Retail cuts were dominated by Walmart, which announced plans to close 269 stores worldwide, which is expected to impact 16,000 workers.

Macy’s is also planning to close stores in 2016, a move that will affect 4,820 employees,” the group said.  At the same time, initial jobless claims rose 8,000 claims to 285,000 in the last week of January versus an expectation of 280,000 jobless claims, according to a new Department of Labor study. A rise in initial claims is often a leading indicator of recessionary conditions as businesses cut staff as they see weaker demand.

Factory Orders Fall

While more Americans are looking for work, fewer retailers are looking for products from factories.  According to the Census Bureau, manufacturers’ new orders, shipments, and unfilled orders fell at the same time—a rare instance outside of a recession in which all three declined.

Total new orders fell for 4 of the last 5 months, falling in December by 2.9% to $456.5 billion. Orders rose 0.7% in November, but fell every other month since July. Shipments fell by 1.4% to $467 billion, falling 8 times in the last 9 months. Unfilled orders fell after rising in October and November, weakening by 0.5% to $1.19 trillion.

The Census Bureau also saw a 0.2% increase in inventories after rising 0.3% in November. Farm machinery, gas field machinery, and petroleum and coal products, including refineries, fell by over 30% on a year-over-year basis in December.

Several analysts noted the decline in both factory orders and jobs as converging economic signals that could indicate broader weak demand. These indicators, which join recent weakness in GDP growth, home buying activity, and manufacturing, are particularly alarming to investment banks, who note that they come immediately after Chair of the Federal Reserve Janet Yellen proclaimed her intention to raise interest rates, making credit more expensive for companies that are apparently seeing weakening demand.