Let’s take a more in-depth look at the leading indicators for the economy in Friday’s abysmal employment report.

As shown in the graph below, employment in goods has historically turned down first; indeed, in some recessions employment in services doesn’t turn negative YoY at all:

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Which is a shorthand way of saying that the leading jobs in the employment report are all in the goods-producing sector. To wit, below is a graph of employment in manufacturing (gold), total construction (red), residential building construction (orange) and goods-producing as a whole (blue), all normed to 100 as of April with the exception of residential construction, which peaked in March:

With Friday’s report for August, all 4 series have now turned down. Manufacturing employment is down -0.3%, residential construction employment is down -0.4%, total construction employment is down -0.1%, and goods-producing employment as a whole is down -0.3%.

One of the actual “official” 10 leading indicators is average weekly hours for manufacturing employees. While the “official” number simply relies on the absolute number, since the 1980s the typical number of hours worked in manufacturing has included significant overtime. Thus while a decline is negative, in the past 40+ years the economy has typically not been in the “danger zone” until this declines to 40.5 hours or less:

While we did decline -0.2 hours in August, the actual number is 40.9 hours, so we aren’t in recessionary territory yet by this metric.

Another leading indicator in the jobs report is the number of short-term unemployed. These are people who have been unemployed less than 5 weeks. This metric is somewhat noisy, but generally accords with initial jobless claims. 

Here is the post-pandemic record updated through this month:

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August was the highest number for such short duration unemployment since the end of 2020.

Next let’s take an updated look at real aggregate nonsupervisory payrolls. Recall that this is an excellent “fundamental” indicator, tellling us how much average American working families in total have to spend in real terms. When that turns down, so does spending, and a recession almost always quickly follows. This had been stagnating this year before improving to a new record in July. In August nominal aggregate payrolls increased 0.4% (orange, left scale), so depending upon revisions we might set another record, although there are clear signs of deceleration (blue, right scale):

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Next, here is a look at the YoY% change in total employment going all the way back to World War 2:

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Currently employment is up about 0.85% YoY. In the past 80 years, only once - in 1952 - has such anemic growth not occurred either in or just prior to a recession.

Finally, let’s take a look at the main monthly coincident indicators of recession monitored by the NBER, including employment, look like over the past 12 months:

There was pretty strong growth in the latter part of 2024 into early 2025, but since the beginning of spring, there is evidence of sharp deceleration or even stagnation. Industrial production and real personal spending on consumer goods look like the crucial reports later this month.

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