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This morning’s jobs report for December was the most important single datapoint we have received since the end of the government shutdown two months ago - and to cut to the chase it was in all respects except the headlines recessionary. 

Below is my in depth synopsis. 

HEADLINES:

• 50,000 jobs gained in total.
•  Private sector jobs increased 37,000, and government jobs added 13,000
• October was revised downward by -68,000 and November by -8,000, for a total of -76,000. 
• The alternate, and more volatile measure in the household report, rose by 232,000 jobs (Important note: this does not take into account the annual population revisions which as usual were added at all once this month).
• The U3 unemployment rate declined -0.1% to 4.5%.
• The U6 underemployment rate declined -0.3% to 8.4%.
• Further out on the spectrum, those who are not in the labor force but want a job now rose 69,000 since September to 6.208 million, aside from August the highest level since September 2021.

Leading employment indicators of a slowdown or recession

These are leading sectors for the economy overall, and help us gauge how much the post-pandemic employment boom is shading towards a downturn. For the last two months they were mainly negative; this month all but one was negative or unchanged:

• The average manufacturing workweek, one of the 10 components of the Index of Leading Indicators, declined -0.1 hour to 41.2 hours, down -0.4 hours from its 2021 peak of 41.6 hours.

• Manufacturing jobs decreased by -8,000, the eighth decline in a row. It is now at a 3.5+ year low.
• Truck driving was unchanged.
• Construction jobs declined -11,000.
• Residential construction jobs, which are even more leading, declined -4,200.
• Goods producing jobs as a whole declined -21,000, the sixth declinine in the last eight months. 

• Temporary jobs, which have declined by over -650,000 since late 2022, declined again by -5,700, a new post-pandemic low.
• The number of people unemployed for 5 weeks or fewer declined -253,000 to 2,289,000 (note that this might also be influenced by the annual Household Survey revisions.

Wages of non-managerial workers 

• Average Hourly Earnings for Production and Nonsupervisory Personnel increased 0.1%, with a YoY gain of +3.6%, the lowest reading but for one month in 2021 since the pandemic, although it remains above the current YoY inflation rate.

Aggregate hours and wages: 

• The index of aggregate hours worked for non-managerial workers was increased 0.1%, and is up only 0.7% YoY. With the exception of 1967 and one month in 1994, in the last 60 years before the pandemic such a low YoY increase always took place in or just before a recession.

• The index of aggregate payrolls for non-managerial workers also rose 0.1%, and is up 4.2% YoY.

Other significant data:

• Professional and business employment declined -9,000 in October. These tend to be well-paying jobs. This is the sixth decline in seven months, and is the lowest number in over 3 years. It is also lower YoY by -0.4%, which in the past 80+ years - until now - has almost *always* meant recession.
• The employment population ratio increased 0.1% to 59.7%.
• The Labor Force Participation Rate declind -0.1% to 62.4% from September through November, vs. 63.4% in February 2020.

SUMMARY

Last month I concluded that the combined October and November report showed “a jobs market is either a hairs-breadth above contraction, or actually in contraction.” This month showed a contracting jobs market in all important metrics except the headlines (which, for the record, were positive).

But all of the important leading metrics, except for the noisiest one (short term layoffs) were negative, or in one case (trucking jobs) unchanged. All the other important goods-producing sectors - manufacturing, construction (including residential construction), and temporary jobs - declined, as did the goods-producing sector as a whole. In the Household Survey, those who want a job but aren’t in the labor force increased. And it is a near certainty that once we have the inflation data we will find out that real aggregate nonsupervisory payrolls declined. Indeed, without the callbacks to government jobs, when we count just private sector jobs, there was only an increase of 37,000.

Let me be clear: the jobs market is being entirely held up by service providing jobs, which tend to rise even in the earliest stages of recessions.

This is a jobs report which is ringing the alarms for imminent recession. The caveats are, as above, how well services spending holds up (we’ll finally get an updated personal consumption report in a couple of weeks), and whether this downturn was a temporary one influenced by the record length autumn government shutdown.

More By This Author:

November JOLTS Report Consistent With A Weak, But Sideways Rather Than Negative, Trend In The Labor Market
Jobless Claims Start The Year Where They Left Off: Very Low Firing, Problematic Hiring Possibly Easing
ISM Services Report For December: Services Sector Still Expanding Strongly