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Tuesday, August 7, 2012

Employment data

The non farm payroll data came in much better then expected last week.  I mentioned Thursday night in the daily update that the seasonal adjustments could make the report surprise on the upside.  There have been many articles on the internet lately talking about that very thing.  Here is a good article about the recent NFP numbers and more about the overall job situation.


Here is one chart from the article I thought was interesting.

This is an index comprised of the employment sub indexes from the regional data.  The 10 level is marked as the important recession warning level.  However, we can see that dropping below 15 has been a good warning more often then not.  It has accelerated down from there many times that ended in recessions.  This index is the lowest it has been in this recovery and is still headed lower with the latest data.  It may not be at red flag levels yet, but it is certainly worth a caution flag.

I am not an economist, but I can read charts.  Check this out.

Over the last 50 years every time the NFP growth rate has fallen below 1.4% year over year we have had a recession as marked by the red dots.  Calling 10 out of 10 recessions with no false signals seems like a pretty good track record to me.  In the latest recovery, we barely ever got above 1.4% in the first place.  It is no wonder why so many people do not believe the recession ever really ended.  Before 1982, the recoveries all had a similar spike up in jobs on a year over year basis.  However, since then each recovery has been weaker.  I suspect this has a lot to do with the amount of manufacturing we have moved outside the country.  When demand picked back up a lot of laid off workers were quickly rehired in those days.  We don't seem to have that situation anymore.

We have applied trillions of dollars in stimulus to the economy and the resulting increase in jobs has been pitiful.  I have written about a lot of data that appears to indicate a recession is imminent if we are not already in one.  This is yet another chart that indicates the odds of recession are extremely high.  I guess it could be different this time, but I am not sure I would want to bet on that.


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