Employment? Its Typical for a Recession…

20080731181617As we await NFP payroll this morning — and while I have connectivity — let’s take a look at what we have seen over the past few quarters.

The economy has produced 6 consecutive months of job losses. While lots of people are discussing how "resilient" the economy seems to be, they are missing the bigger picture.

Employment losses are unfolding as they usually do in the part of the business cycle called "Recession."

Contrary to popular belief, this is what early stage contraction employment looks like: Merrill Lynch’s David Rosenberg points put that "the six-month change in payrolls is now running at -438k. This is the same six-month change as June/01 when the economy was three months into the downturn. Go back to the prior recession and in October 1990 that six month change was -327k. That recession started in July."

Why are ppeople so confused about employment?  Blame the birth-death model. It didn’t exist in the current format last recession, and is artificially propping up NFP data. Rosenberg estimates that and the true job loss this year could be closer to one million.

~~~

Two details re today’s NDP:

First, watch for the number of employees whose full-time jobs are cut down to part time due to general business weakness. Its swelled to more than 3.7 million — the largest figure since the government began tracking such data more than half a century ago. 

Second, pay close attention to the revisions. Like yesterday’s anticipated GDP revisions, look for BLS to make a major downward revision to the trailing 12 month NFP today . . .

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  1. Joshua commented on Aug 1

    Of course, since all the “smart” people are away fishing, we have to listen to that asshole Brian Westbury this morning. Couldn’t you guys have invited him and used him as chum?

  2. dblwyo commented on Aug 1

    Granted the B/D adjustments are severely distorting the headline reporting shouldn’t we all be looking at the trends ? And the structural relationships with the business cycle ? I think you’re beating up too hard on the B/D problems. Instead we should be focused on the fact that a) Employment is a lagging variable and b) the business cycle is just now really starting to turn down toward a real recession.
    Which everyone appears to have missed.
    Another thing which is creating confusion is that the problems of the credit crisis have been mistaken for the business cycle and they’re not. We’ve gotten those out of the way and now can have the pleasure of enjoying a more traditional downturn.

  3. fattyk commented on Aug 1

    In addition, employment is a much different animal now than it was even 8-10 years ago and completely different then any previous recessions. We are a much more service based economoy with a tremendous amount of hourly employees. Companies like Best Buy, Home Depot, etc… have spent millions of dollars perfecting software which allows them to easily manage hourly employees, so all they do is trim an employee from 40 hours to 30 hours or 30 hours to 20 hours. They rarely will “layoff” an employee that has been trained. This allows them to scale up and down JIT “just in time”. This is painful for employees when across the board their hours get slashed by 25% or more. It also MAJORLY fudges the employment numbers for the country. This is rarely discussed but is a HUGE discrepancy when comparing now to previous recessions. It’s not a good thing at all for a consumer based economy.

  4. fattyk commented on Aug 1

    In addition, employment is a much different animal now than it was even 8-10 years ago and completely different then any previous recessions. We are a much more service based economoy with a tremendous amount of hourly employees. Companies like Best Buy, Home Depot, etc… have spent millions of dollars perfecting software which allows them to easily manage hourly employees, so all they do is trim an employee from 40 hours to 30 hours or 30 hours to 20 hours. They rarely will “layoff” an employee that has been trained. This allows them to scale up and down JIT “just in time”. This is painful for employees when across the board their hours get slashed by 25% or more. It also MAJORLY fudges the employment numbers for the country. This is rarely discussed but is a HUGE discrepancy when comparing now to previous recessions. It’s not a good thing at all for a consumer based economy.

  5. Matt Rafat commented on Aug 1

    May be the approach to the latest figures should require a larger tropism than equities only, and Long term interest rates could be more relevant to attention?

  6. Darkness commented on Aug 1

    Something I’ve only seen addressed once, in any publication, is the impact of frozen HELOCs on small business. Small businesses run on shareholder investment and that capital has been summarily shut off by banks panicking over a completely different sector. I don’t see the birth/death model accurately representing the world for at least 6 years.

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