Non Farm Payrolls: Goldilocks? Not Really

Leading up to this morning's employment report, it seemed as though investors were hoping for a weak number so that the Fed would have the cover to cut rates.  So what did we get? A weak number.  For the first time since August 2003, the change in non-farm payrolls actually printed a negative number.  However, instead of equity investors celebrating, they're selling, as recession fears creep into the woodwork. 

So what does a negative number mean for the economy?  In the chart below, we graph the monthly change in non-farm payrolls with periods of recession highlighted in gray.  As the chart shows, the change in non-farm payrolls does turn negative leading up to recessions, but the occurrence of a negative print does not necessarily mean a recession is imminent.  Looking at the chart below, a negative non-farm payrolls report has predicted twelve of the last four recessions.

Comments

[generalenthu]

Eyeballing the graph, it seems that two successive negative prints seems to coincide with a recession, except when we were coming out of the recession in '02. But not of much use as a predictor, as it doesnt seem to be a leading indicator.

[eric]

It is likely there will be revisions to the number. It would be interesting to know the variation as a percent of previous reports.