Saturday, January 10, 2026

Weekly Indicators for January 5 - 9 at Seeking Alpha


 - by New Deal democrat



My “Weekly Indicators” post is up at Seeking Alpha.

If anything, the trends over the last few months to a year appear to be becoming more amplified. Measures of consumer spending YoY have been increasing even further, while the global measure of wages to support that spending, as measured by withholding taxes should payments, are relatively speaking languishing. This suggests that the spending is being supported by (paper) asset appreciation, I.e., stock prices.

Clicking over and reading will provide you with the full up to the minute story, and reward me with a little $$$ in my wallet.
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Friday, January 9, 2026

December jobs report: ringing the alarm bells for imminent recession* (*with caveats)

 

 - by New Deal democrat


[Note: Housing permits, starts, and units under construction were also updated this morning for September and October. I will post my remarks on this report on Monday; but in summary I can say it remained recessionary, with some possible “green shoots” that may indicate a bottom.]


This morning’s jobs report for December was the most important single datapoint we have received since the end of the government shutdown two months ago - and to cut to the chase it was in all respects except the headlines recessionary. 

Below is my in depth synopsis. 


HEADLINES:
  • 50,000 jobs gained in total.
  •  Private sector jobs increased 37,000, and government jobs added 13,000
  • October was revised downward by -68,000 and November by -8,000, for a total of -76,000. 
  • The alternate, and more volatile measure in the household report, rose by 232,000 jobs (Important note: this does not take into account the annual population revisions which as usual were added at all once this month).
  • The U3 unemployment rate declined -0.1% to 4.5%.
  • The U6 underemployment rate declined -0.3% to 8.4%.
  • Further out on the spectrum, those who are not in the labor force but want a job now rose 69,000 since September to 6.208 million, aside from August the highest level since September 2021.

Leading employment indicators of a slowdown or recession

These are leading sectors for the economy overall, and help us gauge how much the post-pandemic employment boom is shading towards a downturn. For the last two months they were mainly negative; this month all but one was negative or unchanged:
  • The average manufacturing workweek, one of the 10 components of the Index of Leading Indicators, declined -0.1 hour to 41.2 hours, down -0.4 hours from its 2021 peak of 41.6 hours.
  • Manufacturing jobs decreased by -8,000, the eighth decline in a row. It is now at a 3.5+ year low.
  • Truck driving was unchanged.
  • Construction jobs declined -11,000.
  • Residential construction jobs, which are even more leading, declined -4,200.
  • Goods producing jobs as a whole declined -21,000, the sixth declinine in the last eight months. 
  • Temporary jobs, which have declined by over -650,000 since late 2022, declined again by -5,700, a new post-pandemic low.
  • The number of people unemployed for 5 weeks or fewer declined -253,000 to 2,289,000 (note that this might also be influenced by the annual Household Survey revisions.

Wages of non-managerial workers 
  • Average Hourly Earnings for Production and Nonsupervisory Personnel increased 0.1%, with a YoY gain of +3.6%, the lowest reading but for one month in 2021 since the pandemic, although it remains above the current YoY inflation rate.

Aggregate hours and wages: 
  • The index of aggregate hours worked for non-managerial workers was increased 0.1%, and is up only 0.7% YoY. With the exception of 1967 and one month in 1994, in the last 60 years before the pandemic such a low YoY increase always took place in or just before a recession.
  • The index of aggregate payrolls for non-managerial workers also rose 0.1%, and is up 4.2% YoY.

Other significant data:
  • Professional and business employment declined -9,000 in October. These tend to be well-paying jobs. This is the sixth decline in seven months, and is the lowest number in over 3 years. It is also lower YoY by -0.4%, which in the past 80+ years - until now - has almost *always* meant recession.
  • The employment population ratio increased 0.1% to 59.7%.
  • The Labor Force Participation Rate declind -0.1% to 62.4% from September through November, vs. 63.4% in February 2020.


SUMMARY

Last month I concluded that the combined October and November report showed “a jobs market is either a hairs-breadth above contraction, or actually in contraction.” This month showed a contracting jobs market in all important metrics except the headlines (which, for the record, were positive).

But all of the important leading metrics, except for the noisiest one (short term layoffs) were negative, or in one case (trucking jobs) unchanged. All the other important goods-producing sectors - manufacturing, construction (including residential construction), and temporary jobs - declined, as did the goods-producing sector as a whole. In the Household Survey, those who want a job but aren’t in the labor force increased. And it is a near certainty that once we have the inflation data we will find out that real aggregate nonsupervisory payrolls declined. Indeed, without the callbacks to government jobs, when we count just private sector jobs, there was only an increase of 37,000.

Let me be clear: the jobs market is being entirely held up by service providing jobs, which tend to rise even in the earliest stages of recessions.

This is a jobs report which is ringing the alarms for imminent recession. The caveats are, as above, how well services spending holds up (we’ll finally get an updated personal consumption report in a couple of weeks), and whether this downturn was a temporary one influenced by the record length autumn government shutdown.


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Thursday, January 8, 2026

Stale news: one “hurrah!” for the positive report on manufacturers’ durable and capital goods orders - for October

 

 - by New Deal democrat


In the category of updated but stale data, yesterday manufacturers’ durable goods orders were released for October. The headline number declined -2.2% to close to a post-pandemic record, while the core capital goods number increased 5.3%: 



Even though it declined, the three month average of capital goods orders was higher than at any point since the pandemic except for the May-July period of last year.

This is - or perhaps more accurately, was - good news. It certainly indicates that through three months ago the general trend of durable goods activity continued to be positive. But the monthly regional Fed reports of manufacturers new orders were also improving through that period, before fading in the past month or two.

So, one “hurrah!” for the good number, but as old news it has little use at this point going forward.


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November JOLTS report consistent with a weak, but sideways rather than negative, trend in the labor market

 

 - by New Deal democrat


Yesterday’s JOLTS report for November was not stale inasmuch as it was at best delayed by a week or two. But nevertheless, since it was for November it remains somewhat old news that can only help to confirm other data we have already received. 

Last month I concluded that the October report “was emphatically not good. In fact, it was red flag recessionary.” But I also noted it was insufficient without confirmation by another month of two’s worth of data. 

In a nutshell, November’s report did not confirm October’s. For most of 2025, in contrast to much other data in the jobs sector, the JOLTS reports had been very much consistent with a “soft landing” jobs scenario. It was not so in October, but returned to that configuration in November.

To briefly recap, the survey decomposes the employment market into openings, hires, quits, and layoffs. The first of those, openings, is soft data that can be influenced by stale or false postings, and trolling for new resumes. It has been on a general uptrend ever since the inception of the series 25 years ago. In contrast, the other series are hard data representing actual actions - and all of those were bad.

Let’s begin with job openings (blue), hires (red), and quits (gold) all normed to 100 as of just before the pandemic:


The “soft” data of openings has been rangebound between 7.103 million and 8.031 million for the past 18 months. This month it declined -303,000 to near the lower bound of that range at 7.146 million. Meanwhile actual hires declined -253,000 to 5.115 million, the lowest reading since the pandemic except for June of 2024. On the other hand, quits rose 188,000 to 3.161 million, solidly in their 18 month recent range. In general, what we see is a sideways trend in all of these for the past 18 months, with a slight jag towards the lower range in the past 6 months.

On the same vein, layoffs and discharges, which while noisy lead both continued jobless claims (gold) and the unemployment rate (red) declined -163,000 to 1.687 million, right in the middle of their 18 month range:



This suggests that in particular the unemployment rate is unlikely to rise further in this or next month’s report.

Finally, the quits rate (left scale), which typically leads the YoY% change in average hourly wages for nonsupervisory workers (red, right scale), rose 0.1% back to 2.0%, also in the middle of its range for the past 12+ months:


This suggests that nominal wage growth, which has been trending slightly downward during that period, is likely to stabilize at least this month. The question here is very much whether the inflation rate will continue to rise (complicated by the downward kludging of the huge shelter component of inflation that will remain with us for at least several more months).

I called the last JOLTS report for October “a bad, even recessionary, report consistent with actual job losses in October.” This report was also consistent with the slight positive rebound in the jobs report for November. In all, a weak, but sideways rather than negative, trend.
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Jobless claims start the year where they left off: very low firing, problematic hiring possibly easing

 

 - by New Deal democrat


Let’s take our weekly look at jobless claims, which are the best up-to-the-moment measure of the labor market.


Initial claims rose 8,000 to 208,000, while the four week moving average declined -7,250 to 211,750. With the typical one week delay, continuing claims rose 56,000 to 1.914 million:


As a reminder, this is the exact time of the year when hard to adjust for seasonality most comes into play. Additionally, there has been a post-pandemic pattern of claims rising in the first half of the year towards a maximum, and declining in the second half to a minimum. This year fits that pattern, but with a pronounced declined since the beginning of November. Nevertheless, initial claims remain very low historically compared with the last 50 years.

As per usual, it is the YoY comparison which is most important for forecasting purposes. There, initial claims were down -4.3%, and the four week average down -0.9%. Meanwhile continuing claims are higher by 2.3%:


This is very much in line with the “low hire, low fire” economy. In fact, the “low fire” portion has been getting even lower. Continuing claims, while elevated compared with 2022-24, have also declined significantly since early November, although they remain higher than the earlier part of 2025. So the “low hire” facet of the labor market may have eased a bit.

All in all, another positive report indicating an economy that is still expanding.


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Wednesday, January 7, 2026

ISM services report for December powerful evidence that the services providing sector of the US economy remains in solid expansion

 

 - by New Deal democrat


As I indicated yesterday and earlier today, we got some stale data on factory orders this morning, as well as a JOLTS report for November. I’ll take a look at those tomorrow.


In the meantime, the big news of the morning has to be the very good ISM services report for December, which shows that the 75% or so of the economy that is services was nowhere near recession last month. *All* of the components moved in the right direction.

To wit, the headline number increased 1.8 to 54.4, the best number since October 2024 (recall that any number above 50 means expansion):


New orders increased sharply, by 5.0 to 57.9, the best reading since October 2024:


Employment increased 2.1 from contraction into expansion at 52.0, the best reading since last February:


Finally, price paid decreased (which is good) -1.1 to 64.3, still showing lots of price increases, but still the lowest number since last March:


I will update this note later today with the three month economically weighted average including the manufacturing sector, but with these numbers it is plain to see that the result is that the economy continued in expansion in December, powered by the services sector.

Further, the ISM services report is in accord with the positive number from ADP this morning, much as the decline in truck sales accords with the continuing contraction shown in the ISM manufacturing report on Monday.

Which means that in Friday’s employment report, I will be looking for a decline in goods-producing jobs, but an increase in service providing jobs.

UPDATE: As promised, here are the economically weighted three month averages for both the headline and new orders indexes:

Headline: services 53.1, manufacturing 48.3; economically weighted average 51.9
New orders: services 55.9, manufacturing 48.2; economically weighted average 53.8

As I wrote this morning, it really is an easy call with the December services numbers.


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In December, truck sales tanked while car sales and private jobs (per ADP) increased

 

 - by New Deal democrat



I will write about the biggest economic release of the day, the ISM services report for December, later. In the meantime, here are two other important data releases for December, one from a private source (ADP), and the other from the BEA’s GDP updates.

As an initial matter, I don’t think we can be confident of the month to month accuracy of the official jobs report for several more months - and that is not counting any further disruption from another possible government shutdown in February.

To cut to the chase, ADP reported at 41,000 gain in private jobs in December. As shown in the graph linked to below, according to this series since July only 27,000 jobs have been added to the economy in total, or an average of 5,400 each month(!):


While this is not recessionary, it is about as close as you could come to the precipice. We’ll see what the official report says on Friday.

An important if underutilized short leading indicators for recessions is vehicle sales. After houses, these are the biggest durable purchases made by the vast majority of consumers. As I have noted in the past, typically truck sales decline first (and rebound second), followed by car and pickup truck sales (which rebound first). Additionally, truck sales are much less noisy and so, after housing, give the first clear warning that a recession is likely ahead.

And December truck sales, which declined another -9% from November to .311 million annualized units, and are down -43.6% from their post pandemic peak, are clearly recessionary (note: since FRED for some reason implements a one month delay in updating its graphs, I have subtracted the December values for car and truck sales so that that level shows at the 0 line. Additionally, I have multiplied the truck sales number by 10 for scale):


In fact, there has never been a case where such a decline has not been shortly followed by a recession, if the economy was not already in one.

Car and light truck sales, by contrast, increased 0.4 million in December to 16.0 million annualized units. This is down -11.6% from their post pandemic peak in 2021, and -10.6% down from their secondary peak last March when there was a rush to buy before tariffs kicked in.

Further, while the 3 month average trajectory since March has been declining, at their current levels car and light truck sales are at higher levels than at any time from 2022 through late 2024. So while truck sales are very recessionary, car sales are not recessionary at all.

I’ll try to draw some broader implications for the economy once we have the ISM services report in hand as well.


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Tuesday, January 6, 2026

Real wages and consumer spending have been crucial positives; here is the most updated look


 - New Deal democrat



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.

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