From a recession-signaling perspective, we have been watching three statistics that are updated with each month’s Jobs Report: Continuing Claims/Total Labor Force Ratio, Cyclical Unemployment, and Temporary Employment.

  • With respect to the Continuing Claims/Total Labor Force Ratio, the 3mo annualized growth rate for July decelerated to -24.6%, well shy of the median rate observed at the start of recessions throughout the history of the time series.
  • With respect to Cyclical Unemployment, the 3mo annualized growth rate for July accelerated to -3.3%, well shy of the median rate observed at the start of recessions throughout the history of the time series.
  • With respect to the Temporary Employment, the 3mo annualized growth rate for July decelerated to -6.5%, narrowly shy of the median rate observed at the start of recessions throughout the history of the time series and is the only one of our “Fab 5” Recession Signaling Indicators suggesting the US economy is currently in a recession.

With the Fed nearing the end of its rate-hiking scheme, asset markets likely require a recession for the current correction to develop into a crash.