Employment Still Points to Weak Economy

You have undoubtedly heard the narrative about continue employment gains suggests continued economic growth, some sort of better outlook,  or something tho that effect. What most fail to realize is that the gain in employment gains continue to decelerate. More so, the acceleration and deceleration in employment tends to indicate the track of economic growth, or in some instance forewarn about a change in change.

In September, the BLS states that the economy added 148,000 jobs in the month according to the establishment survey while according to the household survey, the number of employed gained by over 200,000. That is all well and good, but it ignores that the gains continue to weaken. In September, total household employment was 1.3 million persons better than the year-ago level. Looking at the year-ago change in the total number of employed thought, the increase is 1.5 million persons less than the 2.8 million gain in the year ago period. Overtime, this acceleration/deceleration measure is what tracks economic growth. Lets look at the chart.

The above chart shows year-over-year GDP growth versus the acceleration/deceleration in employment gains. The turns in both are consistent. Now you might ask about the period in the mid 1990's when employment A/D turned negative but GDP remained strong. Well, this is an anomaly. Longer-term, a negative turn in the employment A/D that corresponds with continued positive GDP has only occurred twice in the post war period. Here is the chart of the employment A/D and GDP since the mid-1940's

There were two periods when employment A/D turned negative and GDP remained positive. In fact and in both of these periods, GDP growth was well over 5%. In no period since has employment A/D turned negative in conjunction with GDP growth of sub 2% that the economy did no subsequently roll into a recession. Considering that the Fed has pumped over $2 trillion of cash into economy, we are really seeing unprecedented times in more ways than one.