Do you think we’re in a recession until mid-July?

July Employment Status release data, weekly data and Google data/big data to July 29, on the US economy (continuing Part 1, Part 2, Part 3, Part 4, Part 5, Part 6, as well as “So you think we may be in a recession as of mid-June,” Part One and Part Two (a response to the reader’s expressed view)yesterday!yesterday[my mistake – MDC]) “Based on the indicators I’m following, yes, I believe we are in a continuing recession, and I expect a strong reset of the economy in the second half.”

Below is an image of a series tracked by the NBER Business Cycle Dating Commission, as well as quarterly GDP and IHS Markit GDP.

Figure 1: Nonfarm payroll employment (dark blue), Bloomberg Consensus as of 8/1 (blue+), civilian employment (orange), industrial production (red), personal income excluding transfers in Ch.2012 in US dollars (green), manufacturing and trade sales in $Ch.2012 (black), consumption in $Ch.2012 (light blue), monthly GDP in $Ch.2012 (pink), official GDP (blue bars), all regular logarithms to 2021M11 = 0. Source: BLS, Federal Reserve, BEA, via FRED, IHS Markit (nee Macroeconomic Advisers) (version 8/1/2022), NBER and author calculations.

As seen above, the 528K increase in NFP exceeded the Bloomberg consensus of 250K. In addition, the chain of civil employment based on the household chain also increased, 179 thousand.

One is often concerned about the effects of the corporate birth/death model BLS, an important input in the sample adjustment process, around tipping points. The civil employment chain adjusted to conform to the concept of non-farm payroll is not prone to this problem; It also moved up by 611K.

Figure 2: Nonfarm payroll employment (in blue), civil employment over 16 (tan), and NFP-adjusted civil employment (teal), all in thousands, Source: BLS (July release), BLS.

In fact, the unemployment rate Projection From 3.6% to 3.5%.

The unemployment rate, is not a central factor in the DRC’s deliberations, nor does it indicate a recession when Sahm’s rule is used.

Figure 3: The unemployment rate is U6 (black), the Bloomberg consensus of 8/4 (black +), the default rate necessary to run Sahm’s rule (red box). Source: BLS via FRED, Bloomberg, author accounts.

This data relates to mid-July, when the labor market survey is conducted. For the month of July in general, we can look at the weekly data. Lewis-Mertens-Stock Weekly Economic Index is still above trend:

source: NY Fed via FRED, accessed 4/8/2022.

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