- by New Deal democrat
One of my favorite indicators is both a significant update from last week’s jobs report, as well as a good explanation for why therre has been no “instant recession” due to “Liberation Day” Tariff-palooza. Namely, real aggregate nonsupervisory payrolls.
To quickly recap, this tells us in real, inflation-adjusted terms how much money average Americans have to spend in the aggregate. When the total amount of money goes down in real terms, a recession is almost always at hand.
Here is the historical relationship measured as YoY% changes up until the pandemic (side note: I really wish FRED would add on a feature allowing ranges to be capped, so that the pandemic lockdown months don’t make everything else look like squiggles):
The metric is flawless. Every time inflation went up more than aggregate payrolls YoY, it marked the beginning of a recession +/- 2 months. The only qualification is that “jobless recoveries” show up as continued negative comparisons. But when inflation increases past aggregate compensation, that marks an imminent recession; and when it crosses to the downside, it is always during a period of expansion.
Here is the same relationship post-pandemic:
Aggregate payrolls have consistently increased more YoY than inflation. At the end of 2022 they came close, but no cigar. In fact, since the beginning of 2024 the comparison had become more positive.
Finally, here is the month by month percentage change for the past year:
In last week’s jobs report, aggregate nonsupervisory payrolls increased 0.4%, about average for the past 12 months. Only once in the past twelve months have consumer prices increased more than that.
Consumer inflation for April will be reported next Tuesday. Unless there is a major surprise, real aggregate nonsuperviosory payrolls will be shown to have increased again. And this in turn gives consumers more ability to deal with tariff-related price increases. Which means the Tariff recession will likely continue to be delayed.
