- Temporary Help jobs have contracted so far in 2016. Some like to argue that strong growth in temporary jobs is a sign of poor labor market health. The data suggests just the opposite - growth or contraction in temporary jobs leads growth or contraction in overall job growth by 2-3 months. Employers tend to first expand hiring through temporary positions and then make those positions permanent if demand for the employer's good or service continues. Temp employment has contracted in 2016 - down over 27k in the first 4 months of the year.
- The number of "Slack Workers" has increased. Slack Workers are those workers who are part time for economic reasons - meaning their work has been involuntarily cut from full time to part time by their employer. An increase in the number of of Slack Workers is usually a precursor to an increase in layoffs. The trend in "Slack" employment tends to lead the trend in overall employment by 2-4 months. The number of Slack Workers has increased by over 160k so far in 2016. The number of Slack Workers increased dramatically in 2007 before the last recession.
- Last, but maybe most importantly, the Federal Reserve's survey of Senior Loan Officers shows a tighter environment for Commercial and Industrial Loans (C&I). C&I loans generally are used by small and medium sized business as working capital and to expand their operations. Increased C&I loans is strongly related to stronger job growth. When loan officers tighten their standards weaker C&I loan growth and weaker employment growth is usually the result. The last two quarters have seen a movement from very easy credit conditions to conditions that are on the tighter side of neutral. The relative tightening in credit conditions suggests much weaker job growth over the next 2-3 quarters.
Kevin Spires, CFA, FRM