Gene Epstein of Barron’s rejects the notion that a recession is close at hand.
When recessions are about to begin, demand for labor pulls back. Data released last week reveal that, far from declining, demand for labor is on the rebound. Other jobs data are emitting the same signal: no recession in sight.
I report those findings in light of the tiny 38,000 rise in nonfarm payroll employment for May that shook confidence in the durability of the economic expansion. Fears that the economy is about to contract do not hold up against other job-related evidence.
The best proxy for labor demand is “job openings,” as tracked by the monthly Job Openings and Labor Turnover Survey, dubbed Jolts by the Bureau of Labor Statistics. In March 2001, one month before the onset of the 2001 recession, private-sector job openings as a share of all private-sector jobs fell to 3.5%, down from 4.2% just two months prior. In December 2007, one month before the Great Recession began, the rate of private openings had fallen to 3.1%, down from a cyclical high of 3.6% eight months prior.
On that basis—the data do not go any further back—we should be looking for a similar decline in the job openings rate. Unhappily for the bears, the reverse has occurred. The BLS reported last week that, after a brief swoon late last year, the private-sector openings rate vaulted back to 4.2% in April, matching the peaks of the past 16 years. Moreover, since the 4.2% is calculated as a share of an ever-increasing base of jobs, the actual number of private-sector openings—5.3 million—was a record high.
IT MIGHT BE OBJECTED that Jolts data are too limited, since only two recessions are covered. Might we find evidence of imminent recession in new unemployment insurance claims, which cover the past 10 recessions? No such perverse luck. …
… [W]e should be looking for recent figures to be running higher than the same month a year ago. We find quite the opposite. Not only have claims been at record lows for the past 66 weeks, the year-over-year lows keep getting lower.
