The “Single Best Chart” on Employment?

I saw this video on Bloomberg last week showing the rate of change in business investment in machines compared to employment.  I’ve seen similar charts of nondefense capital goods orders all over the place in recent months explaining why there is downside risk to the economy (see here for instance).

This particular Bloomberg segment said the chart was indicative of a large decline in payrolls.  I think it’s a relatively extreme and somewhat misleading position.

The nondefense orders chart is too narrow in my opinion and subject to a great deal of cherry picking.  It’s better to take the full look at private investment using gross investment.  And when we do so we not only increase the correlation between investment and employment, but we get a far less scary looking picture.  In fact, the current reading shows that employment is growing just about where one might expect.

You can see the full Bloomberg segment here.

(Chart via Orcam Investment Research)


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Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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  • Peter

    Interesting chart. Which data is used, Cullen?

  • KB

    Well, if 90% of employment growth happens to be in part-time retail and fast food “helpers”, then indeed the two charts should not correlated. I assume with current level of deficit the government can support weak employment growth in service even if industrial production crashes… It would be funny if we get into and through the next cyclical recession with positive employment gwowth!

  • http://None Midas II

    Low wage jobs are where the growth is. With lower incomes McDonalds gets the customers, not Olive Garden. Really low wages are not economically good candidates for robots. Texas claims the highest gain in jobs, but they are minimum wage. Higher tech jobs, manufacturing, even engineering and research are more likely to be replaced by applied computerized knowledge. This lowers higher income employment, decreases development costs, but is the way America may succeed in the future world business climate. Not a good future for most college grads. The top 2% will still go to Nordstroms.