Monday, March 7, 2016

Four out of five leading jobs indicators show weakening

 - by New Deal democrat

Every month when I discuss the jobs report, I have a section devoted to those parts of the report which tell us where the overall numbers are likely to go in the future.

We may be at a turning point for those numbers, as 4 out of 5 either look like they are turning or have already turned.

First, here are temporary jobs:  

Note that these typically turn down about a year before the overall jobs numbers turn down.

Here is a close-up on the last year:

These look like they are making a peak now (or may have made a peak 2 months ago).

Next, here are the number of unemployed between 0 and 5 weeks.  This was identified by Dr. Geoffrey Moore, the founder of ECRI, and in his 1993 book he wrote that it was more accurate than initial jobless claims:

These are quite noisy.  But they have not made a new low in 5 months.

Third, here are jobs in manufacturing:

In  the post-World War 2 era, these sometimes but not always peaked significantly before the onset of a recession. Sometimes they went sideways for awhile before rolling over as well.  

Since 1990, they have undergone a secular decline.  But even then the first derivative (i.e., rate of decline) accelerated before the last 2 recessions (red, right scale):

Now here is a close-up on the last 5 years:

These have pretty clearly gone sideways in the last year, and the first derivative has declined.

Fourth, here is the manufacturing workweek:

This is one of the actual components of the LEI.  Note that these peaked almost two years ago, although they are improving off their recent bottom in late 2015, thus being consistent with an ebbing of the shallow industrial recession.

Finally, here are residential construction jobs, which also typically peak a year or more before jobs as a whole turn down:

These are still growing, as the housing sector is doing quite well.

The poor improvement in manufacturing jobs is a representation of the shallow industrial recession in the economy during the past year.  But the other three either  have not made new highs in months, or even going on two years, suggesting  that the overall labor market is decelerating. This is a caution flag for jobs possibly turning negative next year.