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[Chart Of Interest] The Employment Report In One Chart

Jul 09, 2022


The [Chart of Interest] post is a weekly blog spotlighting a highly informative chart and the significance on asset markets through the lens of the EPB Secular & Cyclical Framework.


[Chart Of Interest] The Employment Report In One Chart


The June employment report showed the US economy added 372,000 jobs, but the monthly additions for May and April were both revised lower. Many analysts judge the entire report from a single headline number but miss the fact that the employment report holds thousands of individual data points with deeper messages about the broader economy.

When we analyze economic indicators, every data point can fall into one of three buckets: longer leading, shorter leading, or coincident.

The biggest problem for most people studying economic trends is that they don't understand what economic data points are leading and what data points are lagging.

Coincident economic data is the target and drives Fed policy and asset class performance. We use leading indicators to forecast the future direction of coincident economic data.

Comprehensive analysis of coincident data involves indicators for the "four corners" of the economy:

  • Income
  • Consumption
  • Production
  • Employment

The employment report obviously shows us the coincident direction of employment, but most analysts aren't aware that we can gather a proxy on real income and industrial production from the monthly employment report.

In other words, we can get a rough approximation of three out of four corners of the economy. The employment report doesn't tell us much about coincident consumption, but we can glean information about employment, income, and production.

The chart below is how I measure the entire employment report in one chart.

The chart below holds total employment growth but also contains a proxy for real income and a proxy for industrial production.

This chart shows that our proxy on total economic growth from the employment report is falling sharply but is not yet recessionary.

The Federal Reserve is laser-focused on inflation and will continue tightening monetary policy until the recession arrives.

This is extremely dangerous because inflation and employment are coincident/lagging indicators. By the time employment and other coincident data show glaring weakness, it will be clear that the Federal Reserve was accelerating interest rate hikes into a recession.

If you're interested in this analysis of cyclical trends and how the economic cycle impacts asset prices, then check out the EPB "Basic" subscription. 

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As an added bonus, subscribers also get a quarterly recorded presentation that discusses secular or long-term economic trends and the impact that "economic gravity" has on asset prices. 

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