(Update- I have rolled forward the analysis below, which can be found here)
The Bureau of Labor Statistics released the latest assessment of job openings, stating 236,000 jobs were added to the economy versus an expectation of 165,000. Now I will have to admit that I do not put too much weight on this number outside of how investors react to the initial results versus expectations. The number is just too volatile and has too many fudge factors, including significant seasonal factors and the omnipresent birth/death model, the later of which added construction and finance-related jobs in the 2008/2009 downturn, for my liking.
That is not say the employment figures are worthless. Far from it. For instance, I have been discussing the trend in the annual acceleration/deceleration in the total non-farm payrolls, calculated using the household data, as it relates to the year-on-year GDP growth. The following chart shows the apparent relationship between the two factors since 1948.
The relationship does appear tighter in years past, but directionally the relationship still appears to hold. Looking at recent data, total employment stopped accelerating upward back in late 2010 and has been in decline since. The last two monthly results show an annual acceleration to the downside with results of -332,000 and -451,000 in January and February, respectively.
An acceleration to the downside suggests to me higher recessionary risks, especially in conjunction with stall speed GDP, currently estimated to be 1.6% year-over-year. Additionally, the employment outlook is set to continue its decline. I will elaborate more on this relationship at a later date, but the year-over change in private investment is a leading indicator for employment. You would expect considering that private investment represent the increase or decrease in productive capacity. Higher productive capacity should ultimately lead to higher employment while the opposite is also true. The following shows year-over-growth in gross private investment versus employment growth.
The latest private investment figures increased only at 2.9% rate, down from 11% in prior reported period and continuing the deceleration in recent years. This turn suggests that employment is set weaken.
The Bureau of Labor Statistics released the latest assessment of job openings, stating 236,000 jobs were added to the economy versus an expectation of 165,000. Now I will have to admit that I do not put too much weight on this number outside of how investors react to the initial results versus expectations. The number is just too volatile and has too many fudge factors, including significant seasonal factors and the omnipresent birth/death model, the later of which added construction and finance-related jobs in the 2008/2009 downturn, for my liking.
That is not say the employment figures are worthless. Far from it. For instance, I have been discussing the trend in the annual acceleration/deceleration in the total non-farm payrolls, calculated using the household data, as it relates to the year-on-year GDP growth. The following chart shows the apparent relationship between the two factors since 1948.
The relationship does appear tighter in years past, but directionally the relationship still appears to hold. Looking at recent data, total employment stopped accelerating upward back in late 2010 and has been in decline since. The last two monthly results show an annual acceleration to the downside with results of -332,000 and -451,000 in January and February, respectively.
An acceleration to the downside suggests to me higher recessionary risks, especially in conjunction with stall speed GDP, currently estimated to be 1.6% year-over-year. Additionally, the employment outlook is set to continue its decline. I will elaborate more on this relationship at a later date, but the year-over change in private investment is a leading indicator for employment. You would expect considering that private investment represent the increase or decrease in productive capacity. Higher productive capacity should ultimately lead to higher employment while the opposite is also true. The following shows year-over-growth in gross private investment versus employment growth.
The latest private investment figures increased only at 2.9% rate, down from 11% in prior reported period and continuing the deceleration in recent years. This turn suggests that employment is set weaken.
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