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By the Numbers

Featuring brief segments of economic analysis from our senior economist Michael Bazdarich, PhD.

The economic analysis we previously featured in By the Numbers is now available on the Western Asset Blog. This page will no longer be updated.

Job Growth Continues on 2019 Trends, August Marked Up Some

Private-sector payroll jobs showed a gain of 118,000 jobs in September, with the August level revised up by 24,000. We reported a month ago that the summer pace of job gains was markedly slower than that currently reported for 2018, but at about the same pace as seen in early-2019. The September data were in line with that reading. As you can see in the first accompanying chart (see below, top half), the September pace of job gains was slightly below that for August, but keep in mind that the August gain shown is markedly better than what was initially reported a month ago.

That job growth has downshifted this year is old news. It was behind the Federal Reserve’s decision early this year to cease hiking short rates and actually to begin to cut them this summer. Naturally, with slower growth, the Chicken Littles out there are warning of recession. The fact that job growth looks to have stabilized in recent months, rather than continuing to deteriorate, should provide a second thought to the recession narrative.

Again, based on current data, growth has downshifted, but it does not appear to be on a continuing slide to actual weakness. Many analysts would claim that recent job gains are merely in line with a full employment economy. While we have mixed thoughts about that perspective, it does underline the fact that we are not seeing a continuing slide in growth such as would be consistent with the recession story.

Keep in mind that the Bureau of Labor Statistics has announced that come February it will revise the 2018 job gains down by about 40,000 per month. Meanwhile, the same source data that give rise to the coming downward revisions to 2018 growth suggest that early-2019 job growth is stronger than what the current data suggest. So, even the appearance of a 2019 deceleration in job growth may be an illusion due to preliminary, incomplete data.

Meanwhile, the recession chant has gained some ammunition from recent readings below 50% on the Institute for Supply Manufacturing (ISM) index for manufacturing. We have never been impressed by the readings from this index. Presently, while the ISM index suggests weakness in manufacturing setting in during August and September, the hard data for manufacturing—production payrolls, production hours worked, orders, shipments and output—all showed weakness emerging in late-2018. And, if anything, this weakness of the last year has moderated in ALL the hard data indicators for manufacturing (cf. second chart here). So, for manufacturing as well as for the economy as a whole, the recession story looks way off the mark to us at this time.

Monthly Job Growth and Factory Workers & Work Hours
Monthly Job Growth and Factory Workers & Work Hours
Source: Bureau of Labor Statistics. As of 30 Sep 19

Michael Bazdarich

Product Specialist/Economist

Mike brings more than 45 years of experience to his position. "By the Numbers" will address economic data releases that are pertinent to a broad range of investors.

Prior to joining the Firm in 2005, Mike ran his own consulting firm, MB Economics. He earned his PhD in Economics at the University of Chicago.

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