Economy Watch: ADP Records Decent Job Numbers in April

May 6, 2010
By Dees Stribling, Contributing Editor

The Automatic Data Processing Inc. (ADP) National Employment Report, which doesn’t always jibe with the U.S. Department of Labor’s monthly reports but which is closely watched nonetheless, said on Wednesday that U.S. employers hired a net of 32,000 workers in March. ADP, which processes payrolls in a big way, revised its February figures from job losses of 23,000 to a net gain of 19,000.

Separately, the outsourcing specialist Challenger, Gray & Christmas Inc. reported that the number of planned job cuts by corporate America dropped to a four-year low in April. Employers were planning to show more than 38,000 workers the door last month; bad news for them, but better in the sense that more than 67,000 layoffs were planned in March. During April 2009, corporations couldn’t downsize fast enough, with 132,500 or so pink slips in the works, most of which were probably distributed in short order.

“It is certainly a promising trend that suggests most employers are increasingly confident about conditions going forward and slowing the pace of job cutting,” said Challenger, Gray & Christmas CEO John Challenger in a statement.

But caution is de rigueur in all statements regarding the economic in our time; no one wants to be a foolish optimist. Challenger also added: “However, this does not necessarily mean a hiring boom is just around the corner.”

CRE Valuation Decline Slows

U.S. commercial real estate isn’t increasing in value, but the decline isn’t nearly as fast as it used to be, and probably will stay slow. That’s the conclusion of a survey released Wednesday by consultancy Integra Realty Resources, a specialist in CRE valuation that polled 59 of its managing directors throughout the United States to determine the rate of change in valuations in all property types, including multifamily, lodging, industrial, retail and office.

In short, according to Integra, the markets are calming and year-over-year transactions are increasing. Nationally, the office, industrial and retail sectors only experienced a 2 percent drop in value during 1Q10, with the long-suffering lodging sector experiencing a 4 percent drop. The multifamily property sector did best during the quarter by seeing a scant 1 percent drop in valuations.

“Due to the fact that multifamily will recover first, many investors see this as a safer investment,” Jeffrey Rogers, president and COO of Intrgra, told CPE. “This flight to quality is driving up prices in the stronger core markets. Average cap rates in core markets are 6.2 percent, compared to 7.5 percent in smaller markets.”

The survey predicted that the rate of decline will slow even more significantly in the next six months–certainly to a rate a lot less than the alarming 7 percent to 15 percent value declines suffered across asset classes during 2009. In fact, Integra predicts that all asset classes will only decrease 2 percent in the next six months, with the exception of the multifamily sector, which will stop declining and stabilize in the short term.

Freddie Mac Asks for a Few Billion More

One of the elephant-sized problems left on the table–or maybe under the table or stashed in the broom closet–by the pending financial reform bill in Congress is what to do about Fannie Mae and Freddie Mac. But in the short term, at least one of those GSEs, Freddie Mac to be exact, has an idea: ask for more money from its uncle (that would be Uncle Sam). About $10.6 billion, also to be exact.

And it will get it, too. That was part of the deal back when Freddie and Fannie both were taken into conservatorship by the feds.

To be fair, most of the reason had to do with accounting changes. Previously companies such as Freddie Mac didn’t have to keep all the mortgages that they merely guaranteed, as opposed to owned, on their books. Now they do. Freddie Mac clearly guarantees some shaky loans, since this accounting change caused the company’s equity to contract by $11.7 billion, resulting in a negative net worth for the GSE of $10.5 billion.

Wall Street gave some indications of bouncing back from Tuesday’s losses on Wednesday, but in the end mostly lost ground. The Dow Jones Industrial Average lost 59.94 points, or 0.55 percent, while the Nasdaq was down 0.91 percent. The S&P 500 broke even for the day.