Employment continues recessionary trend

Although technically the overall economy is still not in a recession (GDP is still growing, personal income is still not falling, and industrial production is rising again after a short decline), employment is clearly on a recessionary trend. Total employment has declined and unemployment insurance claims are at a recessionary level.

There are actually two separate stories here, employment and unemployment. The overall economy is still growing and is adding new jobs at a semi-decent pace. Unfortunately, the "old" economy is shedding old jobs at a faster pace. As a result, the number of people who have lost  jobs over the past year is somewhat higher than the net decline in employment.

Actually, there is a third story as well, that the U.S. population continues to grow and health care is helping to keep more people alive and in the labor pool, so the pool of available workers continues to grow even as the economy sheds "old" jobs.

The weekly unemployment insurance initial claims number is above the 400,000 rule-of-thumb threshold that traditionally indicates that the economy is recessionary. Initial claims have been above that 400,000 threshold for seven consecutive weeks, plus a week at the end of June. Being only a rule-of-thumb, this is not a slam-dunk indicator of a recession, but if we do not see some significant improvement over the next month, it will be difficult to deny that this data series is pointing in the direction of a recession. One complication with interpreting this data is that some percentage of the "initial" claims are the result of federal unemployment insurance benefits for people who have been unemployed for some time.

To me, it still only feels as if we are only at the "edge" of a recession, and not fully off the cliff. Even the latest employment report shows only a 84,000 decline in payroll employment. This year we have not seen even a single month with a true, hard-core recessionary decline in the hundreds of thousands.

Nonetheless, employers are acting as if they are experiencing a recession.

The bottom line is that total net job losses are still relatively mild for a traditional recession, but are still at least superficially on a recessionary track.

The real bottom line is that the "old" economy is clearly in recession and the "new" economy is keeping the overll economy from experiencing an overall, true, hard-core recession. Alas, the "new" economy is still not large enough to completely eclipse the "old" economy.

-- Jack Krupansky