The Employment Release and Business Cycle Indicators

Employment downside surprise, +29K vs +89, with cumulative 81K downward revisions to previous two months. Taking into account early benchmark, it’s not changing the picture too much. Figure 1: NFP employment (bold blue), civilian employment with smoothed population controls (bold orange), industrial production (red), personal income excluding current transfers in Ch.2017$ (bold light green), manufacturing and trade sales in Ch.2017$ (black), and monthly GDP in Ch.2017$ (pink), GDP (blue bars), all log normalized to 2025M01=0. Source: BLS via FRED, BLS, Federal Reserve, BEA 2026Q2 3rd release, S&P Global Market Insights (nee Macroeconomic Advisers, IHS Markit) (9/2/2026 release), and author’s calculations. Note that employment from the household survey (CPS) continued to rise, but has not reattained January 2025 levels. This measure is subject to wider standard errors, but the trend is subject to less revision within the year (i.e., for same population controls). Notice that the household employment series adjusted to the NFP concept (a research series) has much slower gradient, and it too remains below January 2025 levels. In addition, early benchmark — which incorporates QCEW data — is growing more slowly than reported NFP. Figure 2: Civilian employment adjusted to NFP concept smoothed population controls, using experimental controls for 2025 (bold orange), manufacturing production (red), ADP private nonfarm payroll employment (light green), real retail sales, CPI deflated (black), freight services indexes (brown), and coincident index in Ch.2017$ (pink), GDO (blue bars), all log normalized to 2025M01=0. Source: BLS, ADP via FRED, Philadelphia Fed, Bureau of Transportation Statistics, Federal Reserve via FRED, BEA 2026Q2 3rd release, and author’s calculations. Note that the freight services index has taken a dive relative to the last reading that went through May. The picture of recent private NFP revisions looks like this: Figure 3: Private NFP from August release (red), from September release (blue), and implied Bloomberg consensus (red +), all in 000’s, s.a., on log scale. Source: BLS, Bloomberg, and author’s calculations. +29 is still above some estimates of employment breakeven, per Torsten Slok, Ernie Tedeschi. and as recounted by AP via BNNBloomberg. Initial jobless claims have a 60 year history of leading the unemployment rate. The increase from 4.1% to 4.2% this month is slightly misleading, in that it is a rounding issue. Carried one further decimal place out, the rate increased from 4.14% to 4.17%. Here’s the relationship graphically: https://fred.stlouisfed.org/graph/fredgraph.png?g=1ZcHG&height=490 The trend, as suggested by the decline in initial claims, remains downward. Jobless claims are overrated. A post wwii data sample that simply doesn’t cover the population in the % of 1950(industry) or 2000(Boomers, Professional class peak). What you have is AI “hiring” effecting that subgroup driving it lower via data center construction. So many people aren’t eligible for these “benefits” and work in the gig. Add gig economy to official data and unemployment, its over 6%+. You can see this in the slow growth of tax revenue compared pre financial crisis. Its partly why deficits are so large. It’s pretty obvious that Lava is just Johnny/Connie/Mary Rosh. If I had embarrassed myself as often as Lava has, I’d change my name, too. Lava/Johnny/Connie really has only one idea, and that is to dismiss various things as unimportant. Jobs data are unimportant, price increases aren’t a big deal, immigration enforcement isn’t important to the labor market. Very predictable, never supported by evidence. I have long had a rule of thumb, that if I can predict what some loudmouth will say, there’s no need to listen to the loudmouth. Lava/Johnny/Connie/Mary Rosh has nothing important to say, because he/she/whatever never says anything new. Always just a dismissal of some fact or idea. No substance at all. For those who are interested in data rather than driven by predetermined ideology, here is the entire 50+ year pre-pandemic hsitory. The leading/lagging relationship between initial claims and the unemployment is obvious and virtually uncontestable: https://fred.stlouisfed.org/graph/fredgraph.png?g=1Zd84&height=490 I’m curious, and worried, about the freight services index. Its history isn’t long, nor is it similar from cycle to cycle, but it does seem leading sometimes, certainly coincident with late cycle and recession. It has been pretty lifeless since early 2023, and is now turning negative. Other measures of freight service have been somewhat more vigorous. The construction and equipment boom associated with the AI build-out has relied on freight movement. There are sizable contradictions between AI investment plans and credit market indicators, which make hints about construction and equipment particularly interesting now. The Cass Index is too negative, while the US Freight Services Index is rather noisy, although I think it is helpful: https://fred.stlouisfed.org/graph/fredgraph.png?g=1Zd8I&height=490 I would look at these indexes in conjunction with trucking employment. And of course, no one indicator or industry is infallible. Hope that is helpful. Thanks. I think this is going to be an important issue to watch. The main driver of the non-consumer economy get a great deal of attention, but that doesn’t mean turning points will be easily recognized. Here’s a little check on the mindset in the bond market these days. A CNBC headline after Wednesday’s softer than expected inflation report: “10-year Treasury yield is higher as traders look past inflation data, await jobs report” A CNBC headline today, after a softer than expected jobs report: “10-year Treasury yield ticks higher despite weaker-than-expected jobs report” Weaker than expected infation and jobs followed by rising 10-year yields. Even though expectations for Fed rate hikes are backing off. Less inflation than expected, less costly funds than expected, fewer jobs than expected, and yields rise. Sell, Mortimer. if anyone is wondering how the alternative measure of unemployment, U-6, which includes those “employed part time for economic reasons”, fell from 7.7% in August to 7.6% in September, even though the U-3 unemployment rate rose and the number of the employed who reported they were forced to accept just part time work rose by 111,000 to 4,501,000 in September. it was due to an unprecedented 236,000 drop in “marginally attached” workers, which also expands the denominator of the U6 metric…the rest of the explanation is in the rounding anomalies: U3 barely rose, from 4.14% to 4.17%, as cited by NDD above, while U6 barely fell, from 7.654% to 7.615%… Texas Governor Abbott has declared a state of emergency in response to high diesel prices: https://www.newsweek.com/texas-declares-diesel-price-emergency-other-states-paying-more-12499408 In other news, Texas Governor Abbott is polling about even with his Democratic challenger: https://www.270towin.com/2026-governor-polls/texas One has nothing to do with the other, I’m sure. European governments have decided to release 100 million barrels of diesel from reserves. The U.S. felon-in-chief had been threatening to cut diesel exports and will take credit for bullying Europe into releasing diesel. Diesel prices have come down, not necessarily because of the announced release. One indicator of the tightness of the product market is the crack spread, which is still very close to the high end of its historic range: https://rbnenergy.com/market-data/3-2-1-crack-spread Another sign that the announcement isn’t having a great effect is the spread between diesel and gasoline prices, which is still quite wide: https://fred.stlouisfed.org/graph/?g=1ZezY Early days, I suppose, but the obvious solution to high petroleum prices is to end the war on Iran. This is why we need to break up the social media conglomerates and turn them all into non-profit user owned platforms. https://www.hollywoodreporter.com/business/digital/elon-musk-documentary-trailer-rejected-tiktok-youtube-1236710259/ A documentary about Elon Musk has been banned by all the big social media platforms. Yikes. The press and social media capitulating to the felon-in-chief was cowardice. Playing dead for every rich guy is just craven. Musk may be the single biggest buyer of propaganda in the U.S., and nobody with an audience wants to poke around in his closet?