- by New Deal democrat
Last Friday I summarized the jobs report as “show[ing] a contracting jobs market in all important metrics except the headlines (which, for the record, were positive). …[A]lmost] all of the important leading metrics … were negative, [including the] goods-producing sectors - manufacturing, construction (including residential construction), and temporary jobs - declined, as did the goods-producing sector as a whole. [And] “…[To] 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. [In short,] This is a jobs report which is ringing the alarms for imminent recession.”
Let me elaborate on that with several important graphs as linked to below.
Since last April, the total number of jobs in the economy (pending benchmark revisions) has grown by a whopping 93,000. That’s under 12,000 per month! On a YoY basis, total jobs have increased only 0.4%. Going all the way back to WW2, only once has YoY job growth decelerated to such a paltry level (in July 1952) without there being a recession:
Indeed, with only one exception during WW2 (1944), by the time job growth has decelerated this much, a recession had already begun.
Goods-producing jobs have always led the way. These peaked in April, and have declined by -90,000 since. They are now down YoY -0.3%. Only three times since WW2 - in 1952, 1967, and 1986 - have there been such declines without a recession, and in all cases where there was, with the same exception of 1944, the recession had already begun:
A similar situation obtains for aggregate hours worked by nonsupervisory personnel. These are up only 0.7%. This series started in the early 1960s. With the exception of 1967 and single months during 1986 and 1996, before the pandemic such paltry increases had always meant recession:
To be fair, since the pandemic there have been 6 equivalent or worse YoY comparisons without a recession occuring.
Next, let’s compare all three of the above series. What I want to show you in this link is the order in which the declines have typically occurred:
Historically, the pattern has been: first, goods-producing jobs turn negative YoY (red); then aggregate hours worked (gold); and finally total employment (blue). Interestingly, 2025 has been somewhat unique in that YoY hours worked have held up better than total employment - but the pattern will not be broken if hours decline more precipitously from here than jobs. As noted above, YoY goods producing jobs have already turned negative.
Finally with regard to the employment report, real aggegate nonsupervisory payrolls did decline in December from a record high in November:
These had grown only 0.3% from March through September, but jumped 0.5% higher as of November, due to a strong 0.7% nominal advance in payrolls, plus the kludged CPI numbers for those months, that added only 0.2%. Had shelter been more accurately calculated in that CPI report, it is likely that real aggregate payrolls would only have advanced 0.2% or even 0.1% instead of 0.5%. So while it is fair to say that this metric is not recessionary through December, a more accurate reading for the past 9 months may be closer to flat.
Which brings me to a link to one final graph, which is the most updated values for the 4 most important series the NBER takes into account when calculating recessions: payrolls, industrial production, real income less government transfers, and real manufacturing and trade sales, all of which have been normed to 100 as of July. The graph also included nominal total business sales for reasons I will describe below:
https://fred.stlouisfed.org/graph/fredgraph.png?g=1QuhH&height=490
Note that several of the series have not been updated beyond September or October. The point is, only two of the series - payrolls and real personal income - have exceeded their readings in July, both in September, and both by only 0.1%. Further, since total business sales declined in both September and October, and they do not take inflation into account, it is almost certain that real manufacturing and trade sales did so as well.
In other words, there may have been at least a small cycle peak in July, with at least a shallow downturn during the autumn, and in particular during the government shutdown. Whether if so it was pronounced enough, or will last long enough, to qualify as a recession (pending revisions!) is completely unkown. But the leading metrics in the December employment report are not auspicious.
