A Warning Sign in Last Week’s Jobs Report?

There’s been a lot of chatter about last week’s jobs report.  From conspiracy theory rumors, to outright accusations of fraud to cheers about how wonderful the numbers are.  I won’t ruin your day with my opinions on whether the numbers were faked or misleading because the fact is, this jobs recovery is one of the weakest in US history.  In fact, using percent year over year gains as a metric, this is the weakest jobs recovery in the last 70 years.  So it’s sad when we’re this deep into a “recovery” and we’re applauding the fact that the world’s largest and most dynamic economy has a 7.8% unemployment rate.  Anyone who tries to paint this jobs recovery as a strong one is simply not looking at the historical facts.

But there was a potential warning sign in last week’s report that no one is talking about.  Throughout much of this economic “recovery” I’ve continually pointed to one positive sign in the labor market – temp work.  Temp help services has been a pretty reliable leading indicator of the overall labor market through the last few economic cycles.  And we’ve seen a nice steady climb in temp work since the economy bottomed back in 2009.  This makes sense since businesses will tend to hire temporary workers before they can see the revenue pipeline filling up to the point where they can hire full-time workers.

The latest reading showed a slight decline in temp workers.  It’s nothing to get alarmed about, but this is an indicator we want to keep an eye on in the next few reports.  If this jobs report was as weak as some claim then we should begin to see further deterioration in the temp services segment.  And a decline in temps is likely to be consistent with a decline in aggregate demand which is likely to be a leading indicator of recession….