Aggregator • MaxedOutMama • ID=79847
I said I might write more about employment this weekend. See the post below for some stuff about trucking and rail.
Here's a bit about employment. I do not and never have considered employment as a forward (leading) indicator, nor do I really consider employment as a whole a coincident indicator. I consider it a lagging indicator. Employment levels max out after a recession has already started in a service economy.
But some particular pieces of employment levels do tend to be leading indicators. I introduced one in the female heads of households two months ago, and here's another - the employment level for 25-34 year- olds. This, in our current economy, does tend to be predictive of recessions:
As our economy has shifted steadily more toward the service/consumption side, this indicator has gained in strength. Over time the demographic shifts in population age can produce long slides, but the short shift is what you are looking at. When that suddenly changes direction (either protracted stagnation or down), you have a high probability for a new recession.
I did not freak out over this last year because there was a self-correcting explanation for the slide, but this year there isn't such an explanation. There are external factors, such as the problems in Europe and China, but they aren't self-correcting. To the extent they are contributing, you can expect more of the same.
Why is this indicator good? Like the female head of households, it's an aggregating category of job generation weakness. Older workers will tend to displace younger workers when things get tight, because job creation is lagging and older workers stick to their jobs. This one usually flags the first stage of recession, and I believe it has this time as well. It's choppy, but we haven't managed to get back to the previous high in a year. We probably won't.