Editor’s note: This is a lightly edited transcript of the accompanying video from professor Peter St. Onge.
Another domino falls for recession as job creation turns negative for small businesses, which employ nearly half of all Americans.
In the past year, payrolls for companies with under 50 employees plunged by nearly 100,000, while job trends were flat for midsized businesses up to 500 employees.
The only bright spot was big businesses—which might be changing, given recent layoff announcements, including 2,500 at Chrysler, 4,000 at Cisco, 12,000 at Dell, and 15,000 at Intel. Paramount and the left-wing Axios both cut 10% to 15% of their workforce.
Economics writer Mike “Mish” Shedlock reports the numbers, adding that he’s “seen enough” and thinks the recession has already begun—possibly starting last October.
The media have been saying recession’s impossible because unemployment is low and there’s still production, but Shedlock notes that recessions typically start during periods of low unemployment and positive industrial production. Because the employers and producers don’t yet know it’s a recession—that’s the whole point—they keep chugging along, straight off the cliff.
Incidentally, part of the reason they’re blindsided is specifically because the thousands of Ph.D. economists at the Fed and Treasury are specifically instructed to hide bad news. They call this “forward guidance,” and you’ll recognize it from those late-night press conferences when [Fed Chairman] Jerome Powell and [Treasury Secretary] Janet Yellen tell us everything is fine.
Meanwhile, Shedlock notes that even that low unemployment may be an illusion, since he expects a potentially million-plus jobs revision—780,000 from three quarters of 2023 alone. This is coming from the infamous—well, infamous among labor statisticians—“birth-death model,” where the Bureau of Labor Statistics guesses how many companies are creating jobs and pretends it’s real.
Note this million-job gap is different from the gap with household surveys—where you actually ask people if they’ve got a job. There, my colleague E.J. Antoni estimates jobs could be overcounting by 2 million or more.
So, what’s next? Jobs are the single most important economic indicator after inflation, not only because jobs are life-or-death for voters, [and] people who lose their jobs become single-issue voters.
But also because jobs are a near-perfect predictor of recession. Once you start to lose jobs, you’re essentially guaranteed a recession.
To illustrate, in the last three normal recessions—1990, 2001, and 2008—the recession started either the same month or within two months of unemployment rising, but they didn’t officially recognize the recession until nine to 12 months after it began.
In other words, don’t bother listening to the official numbers. Even they admit that jobs always call it first.
That’s also why it’s so tempting for the government to lie on jobs numbers; for example, counting part-time gigs as full jobs, not counting people who’ve given up looking for work, or just old-fashioned statistical adjustment.
If history’s a guide, going by jobs, we’re on the edge of recession, they’re just waiting until after November to admit it.
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