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Employment Refutes Impeding Recession Narrative

CAMS Weekly View from the Corner – Week ending 11/1/2019

November 4, 2019

This past Friday the Bureau of Labor Statistics (BLS) informed us that for the month of October new employment expanded by 128,000 new jobs.  The expectation was for an expansion of 80,000 jobs so the end result exceeded expectations.

The previous two months of employment reports (August & September) were revised higher.  Revisions are customary for follow-on months as the BLS captures additional information after the initial release.

August employment was revised upward by an additional 51,000 jobs and September was revised higher by an additional 44,000 jobs.  All told, that is an additional 95,000 jobs created than had been initially estimated.

Importantly, the two months in question were months right in the midst of the “recession is imminent” narrative that had taken hold.

Historically speaking, when recession is truly imminent we do not see stronger than expected employment results coupled with notable upward revisions in prior months of data.

Two Employment Reports

The overall BLS employment report actually consists of two reports.  One is called the Establishment Survey while the other is known as the Household Survey.  The above “jobs created” data comes from the Establishment Survey.

The Household Survey offers a wealth of information such as the total level of Employment and a category known as Not in Labor Force.

Currently, the total number of employed people stands at 158.5 million.  This is the highest on record.

The current Not in Labor Force category stands at 95.4 million people – nearly 1 million under its high mark.  To be in this category an individual must not have a job and must not be currently looking for a job.

Click For Larger View:

The relationship of the two categories is very important for the overall health of a country as it speaks volumes to the structural health of the economic backdrop.

This is particularly true when large government programs and entitlement programs are in place as it takes an expanding base to fund them.

The above is a 40 year view of the ratio of the number of employed people in the U.S. relative to the number of people considered to be Not in the Labor Force.  The red arrows tell the story as these date back to 1980.

The upward arrow tells us the trend is growing in favor of more people employed compared to those Not in the Labor force.  The downward trend states the opposite.

In the bottom right part of the chart we see we are working on a trend change.  Will it stick?  This is an open question but is very important structurally speaking for the overall financial and fiscal health of the United States.

As an aside, the knee jerk response I have consistently heard offered of the Not in Labor Force category growing faster than the Employed category (i.e. the downward red line) is because we are older and the population is retiring.

Unfortunately, the data disagrees with this response as the Labor Force Participation of those 55 years and older has remained rock solid at 40% since 2009 after having climbed upward from 30% dating back to the mid 90’s.

This elicits are large context with many discussion points which is too large for a Weekly View.  What is important is the structural health of the large employment landscape continues to improve.  In addition, these measures, once again, do not point to imminent recession.

I wish you well…

Ken Reinhart

Director, Market Research & Portfolio Analysis

Portfolio Manager, CAMS Spectrum Portfolio


H&UP’s is a quick summation of a rating system for SPX9 (abbreviation encompassing 9 Sectors of the S&P 500 with 107 sub-groups within those 9 sectors) that quickly references the percentage that is deemed healthy and higher (H&UP).  This comes from the proprietary “V-NN” ranking system that is composed of 4 ratings which are “V-H-N-or NN”.  A “V” or an “H” is a positive or constructive rank for said sector or sub-group within the sectors.

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