August Jobs Report Fails to Ease Recession Concerns

Recession indicators are crucial in determining when an economy is heading into a downturn. The NBER Business Cycle Dating Committee, responsible for making official recession calls, relies on four key indicators: nonfarm employment, industrial production, real retail sales, and real personal income (excluding transfer receipts).

In August, the labor market showed some resilience with 162,000 jobs added to nonfarm payrolls, beating forecasts of a 55,000 increase. The unemployment rate remained unchanged at 4.1%, while the U6 unemployment rate dropped to 7.7%. However, population-adjusted nonfarm employment measured by civilian labor force age 16 and over currently sits at 93.70%.

The data for nonfarm employment has undergone multiple revisions, with significant changes seen in annual revisions that stretch back many years. This raises concerns about the reliability of this indicator. Additionally, nonfarm employment isn't adjusted for population growth, which reduces its usefulness in illustrating secular trends.