So you think we’re in a recession starting in mid-July?

Jobs release data for July and weekly and Google / big data through July 29 on the US economy (follow Part I, Part II, Part III, Part IV, Part V, Part VI, as well as “So You Think we could be in a recession by mid-June “, Part I and Part II) – a rejoinder to the point of view of an express reader (yesterday!yesterday[my mistake – MDC]) “based on the indicators I follow, yes, I think we are in a continuing recession and I expect a hard reset of the economy in the second half”.

Here is a picture from the series followed by the NBER Business Cycle Dating Committee, plus quarterly GDP and IHS Markit GDP.

Figure 1: Non-agricultural employment (dark blue), Bloomberg consensus at 8/1 (blue +), civil employment (orange), industrial production (red), personal income excluding transfers in Ch. 2012 $ (green), manufacturing and commercial sales in Ch.2012 $ (black), consumption in Ch.2012 $ (blue) and monthly GDP in Ch.2012 $ (pink), official GDP (blue bars), all logs normalized to 2021M11 = 0. Source: BLS, Federal Reserve, BEA, via FRED, IHS Markit (nee Macroeconomic Advisers) (version 8/1/2022), NBER and author’s calculations.

As seen above, the 528,000 NFP rise far exceeded Bloomberg’s consensus of 250,000. In addition, civilian employment series based on household series also increased, 179,000.

There is often concern about the effects of the BLS birth / death model on businesses, which is a critical input in the process of adjusting the sample, around turning points. The civil employment series adapted to conform to the concept of a non-farm payroll is not susceptible to this problem; it too has moved upwards, by 611K.

Figure 2: Non-farm wage employment (blue), civilian employment over the age of 16 (light brown) and civilian employment adapted to the NFP concept (teal), all in 000, sa Source: BLS (July version) and BLS.

Even the unemployment rate, not a central factor in the BCDC’s deliberations, does not signal a recession when using the Sahm rule.

Figure 3: Unemployment rate U6 (black), Bloomberg consensus of 8/4 (black +), hypothetical rate needed to trigger the Sahm Rule (red square). Source: BLS via FRED, Bloomberg, author’s calculations.

Indeed, the unemployment rate fallen off from 3.6% to 3.5%.

These data persist until mid-July, when the labor market survey is conducted. For July in general, we can look at the weekly data. The Lewis-Mertens-Stock Weekly Economic Index is still above the trend:

sources: NY Fed via FRED, accessed 08/04/2022.