Friday, June 3, 2016

Decelerating jobs growth: I told you so

 - by New Deal democrat

Every now and then, I like to remind you that you are reading the right blog.  Because if I don't pat myself on the back, nobody else is going to, so please bear with me.

Anyway, the weakness in jobs growth was clearly forecast by a downturn in the Labor Market Conditions Index since last summer.  I'm not just talking in retrospect, because I made exactly this forecast.  Here I am last August, discussing the LMCI as a leading indicator:
the LMCI consistently leads the YoY% growth in jobs by 6 - 12 months, but YoY job growth (red) is a much smoother measure:
.... since the LMCI does lead the much smoother YoY growth in jobs, it strongly suggests that YoY payroll growth is going to decline over the next 6 months or so.  And that can only happen if those payroll numbers generally come in under 225,000, and probably even below 200,000 through next winter.
Six months later, in February, I warned that the LMCI portended further weakness:
Average growth for the last 6 months has been 218,000 per month. with 3 months upnder 200,000.
The LMCI forecasts that the decelerating trend in job growth will continue, which means I expect average jobs growth during the next 6 months to continue to average under 225,000.
With three months more jobs data in, it is clear that the deceleration has continued - and intensified.

April LMCI will be reported next week.  In the meantime, here is what I said about last month's report:

This month's report was the 4th such negative report in a row, but the good news is that it was "less bad:"
This is another small addition to the evidence that 2017 might be a poor year. It also suggests that monthly job gains that have already decelerated from a 225,000 rate, will continue to do so. In other words, export more reports of 1xx,000 to come. But at the same time, it is nowhere near as negative as it has been in the past at the onset of recessions.