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Nonfarm Payroll Employment Growth in Context

Summary:
Blockbuster (absolute level) growth number for nonfarm payroll employment. But does the percentage growth rate in NFP dispell the prospect of recession in the near future? I don’t think so. Figure 1: Growth rate in nonfarm payroll employment, month-on-month annualized (blue), and year-on-year (red). NBER recession dates shaded gray. Green dashed line at June 2016 M/M annualized growth rate. Orange shading denotes Trump administration. All growth rates calculated as log differences. Source: BLS, NBER, author’s calculations. As can clearly seen, the recent growth rate (as opposed to change in level) is not particularly impressive, and similar M/M growth rates have been recorded within months of the beginning of a recession: 9 months before the 2007-09 recession, and 4 months before the

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Blockbuster (absolute level) growth number for nonfarm payroll employment. But does the percentage growth rate in NFP dispell the prospect of recession in the near future? I don’t think so.

Nonfarm Payroll Employment Growth in Context
Figure 1: Growth rate in nonfarm payroll employment, month-on-month annualized (blue), and year-on-year (red). NBER recession dates shaded gray. Green dashed line at June 2016 M/M annualized growth rate. Orange shading denotes Trump administration. All growth rates calculated as log differences. Source: BLS, NBER, author’s calculations.

As can clearly seen, the recent growth rate (as opposed to change in level) is not particularly impressive, and similar M/M growth rates have been recorded within months of the beginning of a recession: 9 months before the 2007-09 recession, and 4 months before the 2001 recession.

With that said, one should always be careful with macro data, including the nonfarm payroll (which as I have discussed before is still much preferred to the household series). Jeff Miller has some excellent insights here. Be sure to read.

Menzie Chinn
He is Professor of Public Affairs and Economics at the University of Wisconsin, Madison

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