May jobs report: this is the kind of report you see at negative inflection points


Leading employment indicators of a slowdown or recession

I am highlighting these because many leading indicators overall strongly suggest that an employment slowdown is coming. The following more leading numbers in the report tell us about where the economy is likely to be a few months from now. These were mixed m/m, but several are now sending significant negative signals.

Wages and participation rates

Here are the headlines on wages and the broader measures of underemployment:

Holding Trump accountable on manufacturing and mining jobs

Trump specifically campaigned on bringing back manufacturing and mining jobs. Is he keeping this promise?

March was revised downward by -36,000. April was also revised downward by -39000, for a net change of -75,000.


The household survey has a reputation of turning first at inflection points. For the first four months this year, the household survey was poor, while the establishment survey was on a tear. This month, proving the adage, the establishment survey punted, even as the household survey improved somewhat.

Let me start with the positives: although it was small, job growth held up in the construction, manufacturing, and temporary jobs sectors (although residential construction jobs did decline slightly). On the margins of the employed, both involuntary part time employment, and those who aren’t looking but want a job now, declined, causing the underemployment rate to fall to yet another expansion low.

But there are plenty of negatives: not just the poor headline number, but the big negative revisions to the last two months (this is also something that tends to happen at turning points). The most leading of all the employment measures, the manufacturing workweek, is now down -0.7 hours from peak. Over the past 70 years, this has more often than not signaled a coming recession. The prime age employment to population ratio is now significantly down from its expansion peak at the beginning of this year. Aggregate hours for non-managerial workers also declined, as did the rate of YoY wage growth.

So far this year jobs have grown by an average of 164,000 a month. YoY job growth has now significantly turned down from its peak at the beginning of this year.

This kind of report does not scream “recession,” but on the other hand it is consistent with the onset of recession by the end of this year. Because inflation is under the Fed’s target, it will make it very easy for the Fed to justify a rate cut, possibly as early as this month’s meeting.

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