Quality Over Quantity: The Missing Signal In Jobs Data That Explains The Vibecession

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Quality Over Quantity: The Missing Signal In Jobs Data That Explains The Vibecession Authored by Lance Roberts via RealInvestmentAdvice.com,Recession Indicators Turned Green. Job…

Here is the puzzle investors face right now. S&P 500 companies are on track to report 31.4% earnings growth for the third quarter, the eighth straight quarter of double-digit gains. Last Friday, the October jobs report beat every forecast, with payrolls up 165,000 and unemployment back down to 4.1%. On the surface, the recession indicators have turned green. Beneath the surface, the quality of the jobs tells a different story. Such is the question worth answering: is the labor market healing, or are companies still “hoarding” labor while profits do the heavy lifting?

Let’s start with the economic indicators that say all is well. In the most recent reports:

In other words, if your only recession indicators are layoffs, claims, and the headline payroll count, there is no recession anywhere in sight.

Now look at the other half of the labor data. The JOLTS hiring rate sits at 3.4%, in line with its 2013 average and well below the 3.9% pace of 2019. The number of people working part-time because they can’t find full-time work jumped by 339,000 in October to 4.8 million. Workers unemployed for six months or longer now make up 27.6% of the unemployed. Average hourly earnings grew 3.1% from a year earlier, still short of the 3.7% inflation rate.

Employers are not firing anyone, and they are hiring far more cautiously than the headline suggests. That is the “low hire, low fire” economy, and the chart below shows how unusual the combination is. In 2009, hiring collapsed as layoffs surged and companies shed workers as quickly as they could process paperwork. Today, hiring has slowed to 2013 levels with layoffs near record lows. The two lines usually move together. This time they are not.

In early 2014, I wrote a piece arguing that the headline jobs data was missing the point. My view was that the only employment chart that mattered was full-time employment relative to the working-age population. The reason was simple.

The argument centered on a behavior I called “labor hoarding.”…

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