A Perfect Recession Indicator

The NYT’s Floyd Norris notes that the 12-month change in private sector jobs is down 125,000 jobs from may 2007 to May 2008.

Since 1953, this indicator has a perfect record, identifying 9 out of 9 recessions. When it flips negative (year over year), the economy is already in recession each and every time:

• December 1953, the figure turned negative six months after the recession was later determined to have begun. (negative for 14 months).

• October 1957, it went negative three months after the recession began (negative  for 15 months).

• December 1960, the negative jobs figure came 9 months after the recession started (negative  for 10 months).

• July 1970, it turned negative 8 months after the recession began (negative  for 13 months).

• November 1974, the first negative number came a year into the recession. (negative for 14 months).

• June 1980, the recession was 6 months old when the negative number arrived. (negative  for just 6 months).

• January 1982, the negative number came 7 months after the recession started (negative  for 17 months).

• December 1990, the first negative number came 6 months into the recession (negative  for 17 months).

• June 2001, the recession was 4 months old. The job change number stayed negative for 30 months — the longest streak ever.

Caveat: These numbers are based on revised, not original reported data. So if the data somehow gets revised upwards, this recession signal will go away. But I agree with Norris that revisions are much more likely to make the data more negative, not less . . .

~~~

Jimmy P, put the hallucinogens away, and fire up Amazon: my preferred version of Blade Runner is the Five-Disc Ultimate Collector’s Edition . . .

>

Source:
Jobs Show Recession Is Here
Floyd Norris
NYT, June 6, 2008,  4:29 pm
http://norris.blogs.nytimes.com/2008/06/06/jobs-show-recession-is-here/

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