While the media has been tripping all over themselves as of late talking about the avoidance of a recessionary spat in the economy due to small upticks in the latest economic data, never mind the negative trend, the latest Job Opening and Labor Turnover Survey (JOLTS) points to worsening employment ahead. In the data recently released the number of job openings declined by 157,000 in August which puts it at a three month low. New hires picked up only slightly as gaps were filled by primarily temporary labor. New hires did pick up a bit in the last month (38k) as layoffs declined by roughly the same amount as companies are already near limits of basic employment requirements and holes in employment are filled with temporary labor.
However, the monthly data doesn’t tell us much until we put into some historical context as the trend is much more telling. Over the past several months the number of NET HIRES (Hires less Separations) has been on a steady decline along with the number of hires less job openings. What is important to note here is that these two indexes (using a 4 month average to smooth out volatility) tend to be leading indicators of overall employment.
Hires Less Job Openings tends to peak and decline in advance of a peak in employment. The current decline is now reaching levels that were near the peak of employment during the last economic growth cycle. Unfortunately, the level of employment currently is nowhere close to it previous peak which really speaks to the weakness in the overall economy. Net New Hires, also smoothed to a 4 month average, likewise appears to have peaked and is beginning its decline as well which also does not bode well for future employment growth.
With the “Jobs Bill” now dead on the floor of the Senate, no real support coming from the Fed and very real risk of an international economic slow it is very likely that we will continue to see retrenchment in employment by companies. Temporary hires will continue to drive whatever employment does occur to fill holiday shopping demands but, just as last two years, it failed to lead to stronger future permanent employees.
Trade Deficit Points To Weaker GDP Than Expected
The U.S. trade gap in August was unchanged from a marginally more negative July number than originally estimated. Furthermore, exports and imports both declined which is starting to show the weakness of the underlying economy. On a year over year basis exports decreased as the dollar strengthened due to the European crisis making our goods more expensive in economies on the verge of recession. Likewise, imports, in a testament to the weakness of the consumer here, have continued to decline over the last several months. Businesses are holding back somewhat on importing consumer goods and capital equipment due to lack of demand from their customers.
The worsening in the trade gap was led by the petroleum gap which worsened to $26.1 billion from $25.7 billion the prior month. The nonpetroleum goods gap shrank slightly to $34.3 billion from $34.5 billion in July. The services surplus slipped to $35.1 billion from $35.3 billion in July.
The numbers do not bode well for business expectations of the future and should be reflected in a weaker than expected GDP number for the 3rd quarter as revisions begin to occur over the next two months.
All indicators continue to point to economic weakness from all fronts. We have been talking about an impending recessionary environment by 2012 since early April and the data still confirms that view. Even though the markets are attempting a rally over the last couple of weeks, which failed yesterday at critical resistance, the easy path for stock prices is still lower for the current time.
Images: Flickr (licence attribution)
About The Author
Lance Roberts – Host of Streettalk Live
After having been in the investing world for more than 25 years from private banking and investment management to private and venture capital; Lance has pretty much “been there and done that” at one point or another. His common sense approach has appealed to audiences for over a decade and continues to grow each and every week.
Lance is also the Chief Editor of the X-Report, a weekly subscriber based-newsletter that is distributed nationwide. The newsletter covers economic, political and market topics as they relate to the management portfolios. A daily financial blog, audio and video’s also keep members informed of the day’s events and how it impacts your money.
Lance’s investment strategies and knowledge have been featured on Fox 26, CNBC, Fox Business News and Fox News. He has been quoted by a litany of publications from the Wall Street Journal, Reuters, The Washington Post all the way to TheStreet.com as well as on several of the nation’s biggest financial blogs such as the Pragmatic Capitalist, Zero Hedge and Seeking Alpha.