This morning’s employment report for January showed a 225K increase in total nonfarm payrolls, which was above the Investing.com forecast of 160K. Annual survey data was revised.
Here is an excerpt from the Employment Situation Summary released this morning by the Bureau of Labor Statistics:
Total nonfarm payroll employment rose by 225,000 in January, and the unemployment rate was little changed at 3.6 percent, the U.S. Bureau of Labor Statistics reported today. Notable job gains occurred in construction, in health care, and in transportation and warehousing.
Changes to The Employment Situation Data
Establishment survey data have been revised as a result of the annual benchmarking process and the updating of seasonal adjustment factors. In addition, several changes have been made to household survey data, including the annual update of population estimates. See the notes at the end of the news release for more information.
Here is a snapshot of the monthly percent change in Nonfarm Employment since 2000. We’ve added a 12-month moving average to highlight the long-term trend.
The unemployment peak for the current cycle was 10.0% in October 2009. The chart here shows the pattern of unemployment, recessions and the S&P Composite(NYSEARCA:SPY) since 1948. Unemployment is usually a lagging indicator that moves inversely with equity prices (top series in the chart). Note the increasing peaks in unemployment in 1971, 1975 and 1982. The mirror relationship appears to be repeating itself with the most recent and previous bear markets.
Now let’s take a look at the unemployment rate as a recession indicator or more specifically the cyclical troughs in the UR as a recession indicator. The next chart features a 12-month moving average of the UR with the troughs highlighted. As the inset table shows, the correlation between the MA troughs and recession starts is remarkably close.
We’ve added another chart to illustrate the reality of the unemployment rate – the unemployment rate divided by the labor force participation rate.
The next chart shows the unemployment rate for the civilian population unemployed 27 weeks and over. This rate has fallen significantly since its 4.4% all-time peak in April 2010. It is now at 0.7%, unchanged from the previous month.
The next chart is an overlay of the unemployment rate and the employment-population ratio. This is the ratio of the number of employed people to the total civilian population age 16 and over.