On the heels of one of the worst ISM Manufacturing Index numbers in over two decades, the Employment numbers that come out on Friday were expected to be bleak- and it exceeded this expectation as the decline was 40K worse than the consensus average of -200K. The report released by the Bureau of Labor Statistics is based on two different surveys with different sample sizes and the bigger focus is on the Non Farm Payroll number that comes out of the establishment survey because this survey is more comprehensive with a much larger sample size than the household survey (375,000 businesses vs. 60,000 Households). The number of total employed persons in the U.S. population has been falling for 10 consecutive months and in October ’08 there are 1,138,000 fewer employed persons in the U.S. compared to the November ’07 peak of 138,037,000. And all this time economists have been debating whether it’s really a recession or not- fact of the matter is the relationship between Employment and GDP may not be what it was in the past- correlating Quarterly change trends in GDP vs Employment (15-year moving window) indicates that this relationship may be only half of what it was 4 decades back.
The Economy has become much more complex than what it was back then and we may need to be redefining how we look at these economic indicators.