Latest Employment Data Signaling Recession?
Note the following headline and intro from MarketWatch this morning:
“Payroll growth slows to a trickle”
The nation’s unemployment rate shot up to 5% last month as job growth all but stalled out. December’s increase in nonfarm payrolls amounts to a paltry 18,000 — a sign that the economic slump has spread to the labor market.
What a difference a few weeks make:
Bear Stearns Cos. chief investment strategist Jonathan Golub told Bloomberg back on December 26 that, “The U.S. will avoid a recession next year as a ‘stable’ job market keeps Americans spending amid falling housing prices and higher fuel costs…”
In “Why Economists Are Betting A Recession Won’t Happen” from December 17, the Wall Street Journal’s Sudeep Reddy wrote the following:
The economy is still creating jobs, supporting incomes.
The job market is signaling a modest slowdown in hiring but not a sharp increase in layoffs. While jobs continue to bleed from the housing and finance sectors, growth in service jobs remains robust and most other sectors remain afloat.
Economists in the WSJ.com survey predict an average monthly gain of about 84,000 nonfarm jobs over the next year, which would keep incomes growing and keep consumers spending.
On November 29, MarketWatch reported on the official White House economic forecast for 2008, which predicted the U.S. would avoid a recession. According to MarketWatch:
The forecast shows the unemployment rate will only tick up to 4.9% next year from its current level of 4.7%. But job growth should average a healthy 109,000 per month next year. This is down from this year’s estimated average of 29,000 jobs created per month.
“We are entering a record fifth year of continuous job growth while the unemployment rate remains low and we believe these trends will continue,” said White House chief economist Edward Lazear.
By the way, earlier today Mr. Lazear told CNBC in an interview that the U.S. housing slump was almost over:
The big drain on the economy for the past year and a half has been housing… eventually that is going to bottom out and when that bottom outs, even if it doesn’t expand, it will remove that negative drag on the economy.
Housing has been unfortunately a negative and that should stop probably in the next six months.
Where to now? From the post “Unemployment Rate Crosses Recession Threshold” in the Wall Street Journal’s Economics Blog this morning:
By one rule of thumb, the unemployment rate has now risen enough to send a reliable signal of recession.
Economists at Goldman Sachs say once the three-month average of the unemployment rate has risen 0.3 percentage points, the economy has always either been in, or about to enter, a recession.
The jump in the unemployment rate to 5% in December from 4.7% in November means that threshold has now been crossed…
From MarketWatch:
Sphere: Related ContentThe jobless rate has risen 0.6 percentage points since March. “When unemployment rises by more than 0.5% from its cycle low a recession generally ensues,” wrote Robert Brusca of FAO Economics.
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