- by New Deal democrat
There’s no big economic news today or tomorrow, so let’s take a more detailed look at the leading indicators from Friday’s jobs report. It turns out, the news wasn’t nearly as bad as the headline employment number.
Let’s start with the negative stuff. The simple story is, manufacturing is in a funk. Employment in manufacturing declined -24,000, which is tied for a two year low. Meanwhile, trucking employment declined -1,400 (in the graph below, both numbers are normed to 100 as of their post-pandemic peak):
The big decline in trucking last August was the Yellow Trucking bankruptcy. What is interesting is not only that other firms did not pick up any apparent slack, but that employment has declined again back to that low.
Manufacturing, and the trucking transportation used to deliver those goods, are both leading sectors, although the former in particular is less important than it was before the turn of the Millennium (hello, normalized trade with China).
But if manufacturing was bad news, the other leading sector of construction employment, including total (dark red), residential (light red), and nonresidential (gold) all continued to increase:
And not even all news from the manufacturing sector was bad, as average weekly hours - one of the 10 “official” leading economic indicators - increased 0.1 hour:
After a steep decline from late 2021 through early 2023, the manufacturing workweek has stabilized for over a year. Although I won’t put up the graph, there is evidence that since the 1980s, an important inflection point is the 40.5 hours level. Above that, a decline has usually meant only a slowdown, not a contraction. And as you can see, we are above that level.
Both manufacturing and construction are components of the goods-production sector of the economy, and that headline number also continued to increase, albeit more slowly than before:
I would expect total goods-producing jobs to turn down before any recession begins (because services employment almost never turns down except late in deep recessions).
Turning back to some negative news, consistent with the general trend in the unemployment rate, the number of short term employed (blue) rose to a new 2+ year high last month. Because people file for unemployment after they get laid off, I also include the monthly average for initial jobless claims (red). Both series are normed to their post-pandemic lows. In the case of short term unemployment, I have used the 3 month average because the series is so noisy:
Here is the historical comparison of each. Initial claims are more volatile on a cyclical basis, but the trend is much less noisy in the shorter term, making them a much better short leading indicator:
As I have been noting consistently every week, jobless claims, unlike the unemployment rate, are *not* forecasting any recession.
Finally, although most of the revisions to June and July were negative, that wasn’t the case with one of my favorite fundamentals-based leading indicators, real aggregate nonsupervisory payrolls. July’s reading was revised upward, meaning we set yet another record:
On Friday we found out that *nominal* aggregate payrolls increased 0.4% in August. Barring the very unlikely event of a nasty upside surprise in consumer inflation on Wednesday, we set another record for real aggregate payrolls in August as well.
Basically, outside of the manufacturing sector, the leading elements of employment remain positive and forecast continued growth through the end of this year.
