Markets

Weekly Review: Recession? Not Yet.

An image of a stock chart
Credit: Shutterstock photo

Trends exist until they are broken – and the trends say private non-farm payroll growth will be 60,000 in September. If we throw in the 45,000 Verizon workers the BLS did not count last month as employed because they were on strike – that ups the BLS private non-farm headline to 105,000 when their data is released this coming week.

I believe the ADP employment numbers are the real time numbers to watch – not BLS. The BLS methodology has slower data gathering than the modeled and extrapolated ADP employment numbers. Several months down the line – the BLS will have all its data inputs providing an accurate number.

In a historical context, both ADP and BLS are on the same page. Year-to-date jobs growth is 1,156,000 for ADP and 1,162,000 for BLS – a 0.5% difference.

ADP vs, BLS

Look at the employment trend lines for 2011 – all trending less good. The ADP trend line growth has been declining 30,000 each month in 2011. So a projected jobs growth of 60,000 is well under the labor market growth of nearly 170,000 per month (based on the employment to population ratio of 64.4%). The USA system of monitoring employment ignores our graduates entering the workforce (among others).

Econintersect has also modeled job creation dynamics – this is another sad story.

ADP vs. BLS

The model says the economic drivers for employment growth will worsen in the coming months. Many will not like the message in this post – that employment is bad and likely will get worse. Many are criticizing European leaders for ignoring mishandling their debt crisis. The USA has been ignoring AND mishandling its employment crisis since 2000 – and see, nothing bad has come of it.

Economic News this Week:

The Econintersect economic forecast for October 2011 (see first article under author's photo) predicts very weak growth. It is worrisome that the economy is this weak as any methodology error or abnormal condition could cause the wrong conclusion. A more positive note is that there has been a mediocre improvement in the data over the last two months.

ECRI has called a recession. Their data looks ahead 6 months and the bottom line for them is that a recession is a certainty. The size and depth is unknown. Although Econintersect’s data is not yet recessionary (one month look-ahead) – I would take this recession call seriously.

[click on image to view video]

This week the actual level of ECRI’s WLI index is academic. It did worsen, and the indications are it will continue to worsen.

Continuing the roller coaster ride of good news -bad news, initial unemployment claims fell 37,000 (from 428,000 which was revised up from a preliminary 423,000 last week) to 391,000. This is the best seasonally adjusted weekly number since 02 April 2011. Some pundits are explaining away the improving numbers – but there are always reasons why the number is too good or too bad.

Historically, claims exceeding 400,000 per week usually occur when employment gains are less than the workforce growth, resulting in an increasing unemployment rate. The real gauge – the 4 week moving average – declined only 5,250 to 417,000 because of the backward revision. Because of the noise (week-to-week movements from abnormal events), the 4-week average remains the reliable gauge.

WIUC 9-29-2011

The primary data point this week was the equities markets correction. This makes the richer half of the population poorer, and poorer people think twice when ordering their next yacht.

Bankruptcies this Week: Public Media Works, Hussey Copper, Graceway Pharmaceuticals

Click here for interactive version of the following table with active links.

Weekly Economic Releases

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Other Topics

Economy