We are still suffering the aftereffects of the government shutdown, with no data today, but a helping of mainly stale government data tomorrow and Friday. Tomorrow we get up to date private data from the ISM for services, and from ADP for private employment, along with manufacturers’ orders for October. On Friday we get the official employment report for December along with the very stale housing permits, starts, and construction data for September and October. And if there is another government shutdown in February, these will likely be the last government updates on those subjects until that is over. My plan is to report on the current data on the dates of release, but delay one day until Thursday and Monday to look at the already stale data.
In the meantime, let me do an update on the overall economy and focus on the components of a crucial employment indicator that will be updated as part of Friday’s jobs report.
Let me start by reporting a link to a graph I put up last Friday , which norms nonfarm payrolls, industrial production, real manufacturing and trade sales, and real income less government transfers to 100 as of July. As I noted then, only two of the four - real income and payrolls - exceeded their July readings only once, in September, by 0.1%. All other readings since July have been either flat or down, with several not updated yet since the shutdown. In general the four series, taken together, have been largely stagnant since March or April:
Thus, as I noted, it is possible that July was an expansion peak, with at least a brief shallow recession lasting through the government shutdown.
On the other hand - again as I noted last Friday, by way of Redbook’s weekly retail spending data, one crucial component of the economy has held up well: consumer spending. The official government reporting on this is also very stale, with the last updates only through September, and no further updates scheduled (as of now) until January 29.
With that major drawback, here is a link to real personal consumption on goods (red), services (blue), and real retail sales (gold) through September, normed to 100 as of last December:
As shown in this graph, both real retail sales and real spending on goods have barely budged since then, with the highest reading only 0.4% higher, in August; while real spending on services has continued to climb on trend. As I have noted in the past, real spending on services tends to continue to increase even through most recessions. And the three month average of the other two measures has continued to increase throughout 2025 at least as of the last reading for September. It appears that, at best, we won’t know if this average turned down in October or November until the end of this month.
Another metric that has continued to rise in 2025 has been real average hourly wages.
As you probably recall, one of my headline leading indicators is real aggregate nonsupervisory payrolls. This shows the aggregate amount of $$$ in real terms that average American households have to spend, and have reliably peaked (though no indicator is perfect!) a few months before the onset of recessions. Indeed it is likely that consumers pulling back in reaction to shrinking real payrolls is a main driver of most recessions.
In that regard, the below link goes to a graph which shows the two components of that measure: aggregate hours worked (blue) and real average nonsupervisory hourly wages (red). Becuase there was no update for inflation for October, I also show nominal hourly wages (gold) through November. These are all normed to 100 as of March:
Since then, aggregate hours worked by nonsupervisory workers have been all but stagnant, higher by only 0.2% as of November. Through September, real hourly wages had risen at best 0.4% in July. Together these meant that real aggregate payrolls were all but stagnant.
Then, due to the CPI report for November (which featured a seriously anomalous low reading for the large shelter component of inflation), real hourly wages jumped by another 0.4% to 0.6% higher than in March. This contributed to a 0.8% increase over March of real aggregate payrolls as well.
Let me draw this together. The number of jobs and hours worked in 2025 through November was almost completely flat. But wages, both nominal and real, continued to improve - at least through September - helping to drive consumer spending and in particular, on a three month averaged basis, on goods. It is this spending which *may* have kept us out of recession, depending on how the data is reported for the months of the government shutdown.
Which also means that on Friday I will be paying particular attention to the nominal increase in nonsupervisory wages, both monthly and YoY. This will be important in estimating whether real aggregate payrolls have continued to increase, or whether November’s spike was an outlier and possibly a peak.
