Job Market Jitters?

Higher recession anxieties are tied primarily to rising job market insecurities. What follows are five key labor market indicators which have lifted perceived recession risk.

Jobs are the bedrock of economic expansions. As long as the jobs market is healthy, so too are incomes, spending, profits, and the stock market. As exemplified last week, once employment shows vulnerabilities, recession fears tend to escalate.

Economic reports have been weakening in recent weeks and Friday’s payroll numbers did little to alleviate growing anxieties about the economy. Consider the various news investors have faced in the last couple weeks. The ADP employment gain for February was only 77k versus an expectation of 140k, the February payroll employment gain at 150k was slightly less than expectations, and February household employment collapsed by -588k. In addition, the 4-week moving average of weekly unemployment claims has risen in four of the last five weeks, JOLT job openings compared to employment have declined in two of the last three months and are close to their lowest level of this bull market, the jobs plentiful less jobs hard to get survey has fallen in each of the last two months, and U.S. real corporate profit per job has declined in each of the last two quarters.

Other recent economic releases also support the softening trend evident in the jobs market including the Conference Board consumer confidence index declining in each of the last three months, the Citi U.S. Economic Surprise Index has dropped from +44 in mid-November to almost -8 currently, cyclical stocks have severely underperformed in recent months, and finally, the Atlanta Fed GDPNow estimate for 1^st quarter real GDP growth has collapsed from a high of +4% in early February to its latest estimate of -2.4%! Needless to say, perceptions surrounding the economy have recently worsened and recession fears have again been awakened.

Although the U.S. will still likely avoid a recession this year, investor sentiment does appear to be headed toward another recession scare. An actual recession would probably result in a bear market, but even an ongoing or worsening “fear” of recession will likely magnify the current stock market correction. Rising recession anxieties are tied primarily to rising job market insecurities. What follows are five key labor market indicators which have lifted perceived recession risk.