Previously, I had provided commentary from Art Cashin, who stated that when the year-on-year growth in GDP was at or below 1.5% that the risk of a recession rises materially versus the base case. I had also shown that the ascertain was corroborated by the data. The post can be found here.
To further elaborate on this line of thinking, the employment statistics are also suggesting that the risk of a recession are growing, or at the very least are elevated. Specifically, I am looking at the year-over-year acceleration and deceleration in total, nonfarm NSA employed persons. These figures have been reported monthly and run back until the early 1940's, making the data set appealing in that it encompasses many business cycles and well over 800 data points. Additionally, these figures are not subject to the same assumptions and modeling (for instance the birth/death model) that make monthly the job openings number so suspect.
Comparing this data to year-on-year GDP growth shows a fairly tight correlation with a 71%. I provide two historic views of this relationship. The first since the early 1990's and the second since the employment statistics and GDP figures began being recorded.
Since early 1990's
Since early 1940's
The relationship should appear obvious. Getting back to the premise of the post though, I believe current employment statistics are indicating elevated risks of a recession. The acceleration/deceleration in the employment figures has been decelerating for a few months now. Additionally, January figures show a decline, a first in a long while. Historically, a decline in the acceleration/deceleration of employment that follows a falling trend is met with subpar GDP growth in the next two quarters. In fact, the median GDP growth rate after this occurrence is just above the zero line versus a median of 3% in all periods. This is another indicator leading me to think that recession risks are elevated.
To further elaborate on this line of thinking, the employment statistics are also suggesting that the risk of a recession are growing, or at the very least are elevated. Specifically, I am looking at the year-over-year acceleration and deceleration in total, nonfarm NSA employed persons. These figures have been reported monthly and run back until the early 1940's, making the data set appealing in that it encompasses many business cycles and well over 800 data points. Additionally, these figures are not subject to the same assumptions and modeling (for instance the birth/death model) that make monthly the job openings number so suspect.
Comparing this data to year-on-year GDP growth shows a fairly tight correlation with a 71%. I provide two historic views of this relationship. The first since the early 1990's and the second since the employment statistics and GDP figures began being recorded.
Since early 1990's
Since early 1940's
The relationship should appear obvious. Getting back to the premise of the post though, I believe current employment statistics are indicating elevated risks of a recession. The acceleration/deceleration in the employment figures has been decelerating for a few months now. Additionally, January figures show a decline, a first in a long while. Historically, a decline in the acceleration/deceleration of employment that follows a falling trend is met with subpar GDP growth in the next two quarters. In fact, the median GDP growth rate after this occurrence is just above the zero line versus a median of 3% in all periods. This is another indicator leading me to think that recession risks are elevated.
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