Note from dshort: With this morning's release of the Consumer Price Index for September, we can now calculate Real Retail Sales for last month.
Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which they base their decisions. This committee statement is about as close as they get to identifying their method.
There is, however, a general belief that there are four big indicators that the committee weighs heavily in their cycle identification process. They are:
- Industrial Production
- Real Personal Income (excluding Transfer Payments)
- Nonfarm Employment
- Real Retail Sales
The Latest Indicator Data
Today's report of 214K new nonfarm jobs was a bit lower than most economists had forecast, but the lower number was more than offset by upward revisions to the new jobs for August (from 180K to 203K) and September (from 248K to 256K). The unemployment rate dropped a notch from 5.9% to 5.8%.
Nonfarm Employment, especially after the revision of the two previous months, is the least volatile of the Big Four. As we can see in this snapshot of the monthly percent change since 2000.
Note that the source for this series is the monthly Establishment Survey of business and government. For a much more volatile look at employment, here is a comparable chart of the monthly percent change in Civilian Employment from the Household Survey, and note the much bigger range of that vertical axis.
The Generic Big Four
The chart and table below illustrate the performance of the generic Big Four with an overlay of a simple average of the four since the end of the Great Recession. The data points show the cumulative percent change from a zero starting point for June 2009. We now have all four indicator updates for the 63rd month following the last recession. The Big Four Average is (gray line below).
Current Assessment and Outlook
The overall picture of the US economy had been one of slow recovery from the Great Recession with a clearly documented contraction during the winter, as reflected in Q1 GDP. Data for Q2 and Q3 supported the consensus view that severe winter weather was responsible for the Q1 contraction -- that it was not the beginnings of a business cycle decline. However, the average of these indicators in recent months suggests that, despite the Q2 rebound in GDP, the economy remains near stall speed. We'll need some near-term improvement to avoid rolling over.
Next up for the Big Four will be the mid-month release of Industrial Production and Real Retail Sales.