The recent job cut report from Challenger, Gray and Christmas shows us quite clearly that the job market in the United States is showing signs of stress, a situation that could have an impact on the timing of the Fed's interest rate increase.
In July 2015, monthly job cuts rose significantly to 105,696, the highest level since September 2011 when 115,730 jobs were cut, coincidentally, the last time that monthly job cuts breached the 100,000 mark. The July job cuts rate is 136 percent higher than the 44,842 job cuts in the month of June 2015 and 125 percent higher on a year-over-year basis.
On top of these rather grim statistics, the January to July 2015 total is now 393,368, up 34 percent from 292,921 job cuts over the same seven month period in 2014 and the highest seven month total since the Great Recession when 978,048 jobs were cut over the period between January and July 2009. In total, 483,171 jobs were cut through 12 months in 2014; as it stands now, we are 81.4 percent of the way to the 2014 annual total in just over half of the time.
Why were there so many cuts in July? Thanks to cuts to civilian and troop levels in the United States Army as the War on Terror winds down in Afghanistan and Iraq, 57,000 personnel will disappear from government payrolls over the next 24 months. This means that the private sector or other government departments will have to absorb 57,000 unemployed men and women, many with very specialized training that may not translate well to the private sector. Past job cuts in the military and government sector have led to other high monthly job cut totals, particularly in September 2011, as noted above, when 50,000 job cuts of the 115,730 total were cuts by the United States Army.
Before we get all excited because this looks like a one-time anomaly, here is a graph showing the number of job cuts during the second quarter of each year since 2006:
Excluding the military cuts in July, as we can see, the number of cuts in the first six months of 2015 is the highest that the level has been since 2009.
Sectors that have cut a significant number of jobs over the first seven months of 2015 include:
Energy - 69,550 job cuts
Government - 67,425 job cuts
Retail - 47,762 job cuts
Industrial Goods - 28,923 job cuts
Computer - 25,542 job cuts
Financial - 19,584 job cuts
The cuts in the energy sector are in addition to 5318 job cuts in the first seven months of 2014, cuts that took place prior to the oil price slump.
Here is a list of the five states with the most job cuts so far in 2015:
Texas - 81,911 job cuts
District of Columbia - 58,225 job cuts (57,000 in July 2015 alone)
California - 31,373 job cuts
Minnesota - 26,602 job cuts
New York - 25,595 job cuts
The job cuts in the energy sector should surprise no one given this:
So far in 2015, 78,460 jobs have been cut because of low oil prices with 8,878 job cuts in July alone. This is the third highest reason for job cuts after "restructuring" and "cost-cutting".
While the employment situation in the United States has shown significant improvement, as I have pointed out before, there are key weak points and the 115,730 job cuts in July could be difficult for the economy to absorb if any degree of economic weakness appears.