Weekly Economic Release Summary: Employment Growth In Decline

For months, our interpretation of JOLTS (BLS Job Openings and Labor Turnover Survey) has been that employment growth will be slowing. JOLTS again this past week continues to reaffirm the slowing growth forecasts.

The graph below shows the general correlation between non-farm payrolls (red line) and JOLTS (blue line).

As we have been forecasting based on our interpretation of the JOLTS data, JOLTS growth began to slow at the end of last year. And sure enough in 2019, BLS employment began to slow with the current year-to-date being the worst since 2010.

Cumulative Non-farm Private Employment Growth Through June of Each Calendar Year

adjusted unadjusted
2004 1147 1828
2005 1243 1984
2006 1131 1826
2007 701 1329
2008 -844 -374
2009 -3851 -3429
2010 468 860
2011 1218 1761
2012 1133 1727
2013 1254 1722
2014 1392 1874
2015 1263 1732
2016 963 1513
2017 1038 1693
2018 1347 1916
2019 960 1537

Source: BLS; author calculations

Our monthly economic forecast also has been suggesting a slowing of employment growth beginning with our October 2018 post - and the Conference Board's employment growth forecast began declining in December 2018. Slowing employment growth is being widely forecast if anyone was listening.

Another interesting data point released this week came from the BLS. The graph below shows that the middle class continues to draw the short stick in wage growth. The only positive thought is your rate of growth for income gets better once the government makes you poorer or richer.

Economic Forecast

The Econintersect Economic Index for July 2019 long-term decline began in July 2018 - and continued this month. Our forecast is approaching closer to the zero growth line. There currently is a disconnect between GDP and the Econintersect Economic Index. Because inventories rise and trade falls going into economic slowdowns (which increases GDP), one can suggest that GDP is a lagging indicator to the underlying economy.

The fundamentals which lead jobs growth are now showing a slowing growth trend in the employment growth dynamics. However, we expect jobs growth over the next six months to exceed the growth needed to maintain participation rates and the employment-population ratios at the current levels.

Economic Releases This Past Week

The following table summarizes the more significant economic releases this past week.

Economic Release Summary For This Week

Release Potential Economic Impact Comment

May Consumer Credit


The headlines say consumer credit rate of annual growth marginally declined relative to last month.

This month's headlines said:

In May, consumer credit increased at a seasonally adjusted annual rate of 5 percent. Revolving credit increased at an annual rate of 8-1/4 percent, while non-revolving credit increased at an annual rate of 4 percent.

Unadjusted Consumer Credit Outstanding

Month- over- Month Growth Year- over- Year Growth Month- over- Month Growth without Student Loans Year- over- Year Growth without Student Loans
Total -0.2 % +5.2 % -0.2 % +4.5 %
Revolving -0.2 % +4.7 % n/a n/a
Non- Revolving -0.1 % +5.4 % -0.3 % +4.1 %

Household Debt Payments As A Percent of Disposable Income

June Conference Board Employment Index Employment confirming the slowing economy

The Conference Board's Employment Trends Index - which forecasts employment for the next six months - declined with the authors saying: "This marks the fourth-largest monthly negative contribution in the series history, which is potentially the result of noise rather than a more significant signal".

Econintersect evaluates the year-over-year change of this index (which is different than the headline view) - as we do with our own employment index. The year-over-year index growth rate decelerated by 2.6% month over month and grew 0.6% year over year. The Econintersect employment index declined. Remember, both of these indices are predicting growth six months from now.

May JOLTS Very small growth

The BLS Job Openings and Labor Turnover Survey (JOLTS) can be used as a predictor of future jobs growth, and the predictive elements show that the year-over-year growth rate of unadjusted private non-farm job openings is in contraction or close to it.

The unadjusted data this month remained well below average for the rate of growth seen in the last year. With this low average rate of growth, JOLTS is predicting lower employment growth than we have seen over the past year. Jolts predicted the slowing of employment growth.

June Wholesale Trade n/a

The headlines say wholesale sales improved month over month with inventory levels very elevated.

Overall, the rolling averages tell the real story - and they declined this month. This sector's growth continues to trend down. The rolling averages are in contraction if inflation-adjusted.

Inventory levels this month remain at recessionary levels.

June FOMC Meeting Minutes FOMC actions are lagging indicators

The 19 June 2019 meeting statement presented the actions taken. This post covers the economic discussion during this FOMC meeting between the members (minutes were released yesterday). An interesting quote:

... Some participants suggested that although they now judged that the appropriate path of the federal funds rate would follow a flatter trajectory than they had previously assumed, there was not yet a strong case for a rate cut from current levels. They preferred to gather more information on the trajectory of the economy before concluding that a change in policy stance is warranted. A few participants expressed the view that with the economy still in a favorable position in terms of the dual mandate, an easing of policy in an attempt to increase inflation a few tenths of a percentage point risked overheating the labor markets and fueling financial imbalances. Several participants observed that the trimmed mean measure of PCE price inflation constructed by the Federal Reserve Bank of Dallas had stayed near 2 percent recently, underscoring the view that the recent low readings on inflation will prove transitory ...

I suggest everyone read these minutes; they have not been cookie cutter minutes (having little real change between meetings) since the departure of Chair Janet Yellen.

I find it interesting that the markets only seem to care about the Federal funds rate, but the FOMC is saying the economy weakened:

... Many participants noted that, since the Committee's previous meeting, the economy appeared to have lost some momentum and pointed to a number of factors supporting that view including recent weak indicators for business confidence, business spending and manufacturing activity; trade developments; and signs of slowing global economic growth. Many participants noted that they viewed the risks to their growth and inflation projections, such as those emanating from greater uncertainty about trade, as shifting notably over recent weeks and that risks were now weighted to the downside.

June Consumer Price Index n/a

According to the BLS, the Consumer Price Index's (CPI-U) inflation rate was 1.6% year over year (lower than the reported 1.8% last month). The year-over-year core inflation (excludes energy and food) rate grew from 2.0% to 2.1% and is near the target set by the Federal Reserve.

Energy was the main reason inflation declined. Medical care services' cost inflation was unchanged at 2.8% year over year. A downward trend continues on consumer prices.

June Sea Container Counts Indicating a weak economy

The June year-to-date import/export container count growth rate remains in contraction. Simply looking at this month versus last month, this was a marginally stronger month for exports and a weaker month for imports. The year-over-year rate of growth slowed for imports and improved for exports. Still, year-to-date growth for both imports and exports remains deep in contraction.

The three-month rolling averages for exports and imports are in contraction.

Imports' container counts give an indication of the U.S. economy's state, and the soft data continues to indicate a weak economy. Exports are saying the global economy is weak as well.

Container data is consistent with other transport data indicating a weak economy.

June Producer Price Index n/a

The Producer Price Index's (PPI) year-over-year inflation declined from 1.8% to 1.7%.

Despite being in trade wars, the PPI has declined. Trade wars have both positive and negative impacts on prices.

Surveys Still relatively high optimism

June Small Business Optimism Index - America's small business owners' optimism took a modest downturn in June, according to the NFIB Small Business Optimism Index, slipping 1.7 points to 103.3. While optimism remains at historically high levels, the June figure reverses the gain posted in May, with six components falling, three improving, and one unchanged.

Rail Counts Definitely not positive news

Rail so far in 2019 has changed from a reflection of a strong economic engine to contraction. Currently, not only are the economic intuitive components of rail in contraction, but the year-to-date also has slipped into contraction.

My usual weekly wrap is in my instablog.

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