All Aboard the "No Recession" Train

Mish

Hiring bounced back in November. More are hopping on the "No Recession" Train. I'm not one of them.

No Recession in Sight

Here's a Tweet that caught my eye today.

This post on Change in Nonfarm Payrolls and Average Payrolls Change in U.S. Economic Cycle represents the entirety of the analysis.

These two lines are the entirety of the article (emphasis mine).

Nonfarm payrolls have averaged 184k the past 12 months, more than the cycle average of 170k. This does not happen in front of recessions.

Image: LPL Financial LLC

Really?

Where's the Proof? Heck, where is the supporting evidence?

How about some recession bars?

How about any semblance of analysis to back up the claim?

It's not even clear what the author means by "cycle average".

All Employees vs Employment Level

Leading and Lagging Indicators

All Employees is from the establishment survey.

The Employment Level is from the household survey.

November Bounce

OK November bounced. Why?

The GM strike ended and there were additional seasonal factors as discussed in Jobs Surge in Strike-Ending and Seasonal Adjustment Rebound.

Manufacturing Blowout?

I dove further into the details with Trump Tweets "Manufacturing Blowout": What's the Real Story?

I presented six charts. Here the key one.

Manufacturing Average Weekly Hours Year-Over-Year Detail

GM Strike

The GM strike ended on October 25. And Thanksgiving was November 28, the last possible date, further skewing BLS job sampling.

Yet, there was no improvement in manufacturing hours of actual production workers!

2015 vs Today

The dip in 2015 was energy related. This dip isn't.

This manufacturing dip is related to a global slowdown in trade enhanced by Trump tariffs.

What About Hiring Trends?

I am glad you asked.

Please consider Hiring Trends in Recessions by Size of Firms

Slump in ISM and Freight Traffic

Please note Another Recession Warning: ISM Contracts 4th Month

Also note Recession Warning: Freight Volumes Negative YoY for 11th Straight Month

No Recession?

Recessions are difficult to predict. I certainly provide ample proof.

But at least people ought to discuss the actual data instead of making baseless claims.

Correction

I originally stated "Employment is a very lagging indicator that peaks just ahead of recessions."

Based on my charts as shown, a reader accurately corrected that assessment.

The charts show employment sometimes leads, sometimes lags, and sometimes is coincident. On average it is coincident.

But the charts reflect revisions that are in fact lagging. So the correct interpretation counting is likely coincident to lagging.

Mike "Mish" Shedlock

Comments (26)
No. 1-13
Mish
Mish

Editor

In unrelated news, here's an amusing poll:

Carl_R
Carl_R

Re: "Employment is a very lagging indicator that peaks just ahead of recessions."

That would make it a leading indicator with a very short lead time, or a concurrent indicator. A lagging indicator would peak after the recession has begun.

Sechel
Sechel

Exports are not good, Agriculture stinks. We got a boost because the G.M. strike got settled and housing picked up a bit from lower rates but consumer is once again stretched and incomes have not matched job growth. I'm in the recession camp and for the additional reason that our economic expansion is long in the tooth.

Mish
Mish

Editor

Correction

I originally stated "Employment is a very lagging indicator that peaks just ahead of recessions."

Based on my charts as shown, a reader accurately corrected that assessment. The charts show employment sometimes leads, sometimes lags, and sometimes is coincident. On average it is coincident.

But the charts reflect revisions that are in fact lagging. So the correct interpretation counting is likely coincident to lagging.

mkestrel
mkestrel

Regardless of the timing of indicators production workers hours are clearly back to a level of the last recession. That is a ominous sign

Brutus' Admirer
Brutus' Admirer

How do you have a recession when the real yield on the 10 year Tres or 2 year CD is negative? When credit is being created at an annual rate of ~7%? Credit ex nihilo is so cheap?

klausmkl
klausmkl

Market patterns show a roll is imminent. Defensive sector etf's show bullish patterns. Figure it out yourself...im talking weekly/monthly charts not daily bullshit/ Also xle has h&s pattern/ive been out and don't really care, retired.. look for yourself

RobinBanks
RobinBanks

Same in the UK. Record low levels of unemployment but a recent contraction in manufacturing and a retail sector on its knees.

Casual_Observer
Casual_Observer

We will get back to 2013 or 2014 levels. I see 1% GDP for 2020 but no recession. A few Fed rate cuts will be needed to avoid a recession but we wont see back to back quarters of negative GDP ( technical definition of a recession).

Casual_Observer
Casual_Observer

FWIW we would have to get huge job cuts in order to get a recession. Even 25k to 50k jobs per month wouldnt create a recession. We actually have a contracting working population in the US due to retirements so more jobs are becoming available and this counts in the jobs numbers. People learned from 2008 to get out at the top instead of getting greedy. The US economy has a better forecast than Japan due to demographics and sheer number of people that can work even with immigration contracting due to H1B visas not being renewed and less people coming on new visas. I use to be a doomer and gloomer about the US economy but slow growth is sustainable growth. We will likely get lower prices with it.

GruesomeHarvest
GruesomeHarvest

How to make something bad look good. The large rise in employment under Obama was due to full time workers being switched to part time workers and thus needed to get a 2nd job. Cachink! Employment figure grows as more workers required to work at two, miserable, part time jobs. Lies, Damned lies, Government statistics...

Realist
Realist

Based on all the analysis, I see no reason to change my prediction of slogflation going forward. Growth should slow to a 1% average over the early part of the next decade. I am in the “no recession” camp, unless there is a black swan event.


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