The labor market continues to look good, although the number of employed (Household Survey) fell by 355 thousand people in November, which means a YoY decrease of 0.45%. Such an annual dynamics of this series has historically always meant a recession – see Figure 1.
However, other data series do not yet indicate a recession. See Figures 2 and 3. The annual dynamics of the number of jobs (Establishment Survey) is still 1.45%. For Total Private it is 1.33%, and for public employees as much as 2.13%.
Such a large discrepancy in data between two surveys is very rare – see Figure 4 – and is probably not related to the business cycle.
However, if we look at the annual dynamics of the number of jobs in Total Non-farm and Total Private (establishment survey), we are slowly approaching a recession... at least when it comes to the annual dynamics of these series - see Figure 5.
For Total Non-farm Payrolls, the decline in the annual dynamics to 1.45% meant:
in 2019, 29 months to recession (29 months to the peak on the S&P500),
in 2007, 11 months to recession (8 months to the peak on the S&P500)
in 2001, 3 months to recession (we were already 9 months past the peak on the S&P500)
in 1990, minus 1 month (we were already 1 month past the peak on the S&P500).
For Total Non-farm Private Payrolls, the decline in annual dynamics to 1.33% meant:
in 2019, 6 months to recession (6 months to the peak on S&P500),
in 2007, 9 months to recession (6 months to the peak on S&P500)
in 2001, 2 months to recession (we were already 10 months past the peak on S&P500)
in 1990, 1 month to recession (1 month to the peak on S&P500).
Soft landing story:
Interestingly, in the context of the last soft landing in 1995-1996... annual dynamics dropped then only to 1.81% for Total Private... now we are much lower... only at 1.33%.
How to avoid recession:
To avoid recession signals e.g. from Total Private, then monthly Total Private should grow at least 200 thousand per month for the next 6-7 months in a row….
For Total Non-farm it would be 240 monthly..
And to confirm the “soft landing” as in 1996, these monthly increases should be much higher.
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