The Resilience Of The Labor Market (Chart Of The Week)
Our featured chart from the EPB Weekly Economic Briefing / Week 23
We regularly look at how various Business Cycle indicators and our proprietary indexes have performed since the 3M10Y yield spread inverted.
Inversions in the yield curve are important signals in the Business Cycle that often start the recessionary clock in somewhat of a mechanical fashion through the impact on real credit creation.
In the chart below, we're looking at how the EPB Coincident Employment Index has performed in the 18 months since the 3M10Y spread inverted compared to all historical inversions dating back to the 1970s.
As a reminder for readers new to EPB Research and our composite index approach, the Coincident Employment Index is a basket of employment variables, including nonfarm payrolls, the household employment level, aggregate weekly hours, and two measures of the unemployment rate.
The EPB Coincident Employment Index was updated after the May Employment Situation report and showed a slight decline month over month. However, the EPB Coincident Employment Index has increased a total of 1.1% in the 18 months since the yield curve inverted compared to an average performance of -2.0%.
Currently, this is the strongest labor market performance post yield curve inversion on record, dating back to the early 1970s.
It is important to note, however, that the current data is unrevised, while the historical bands are revised data.
So, it remains possible that future benchmark revisions to payroll data change the current picture.
For now, the labor market is growing at a below-trend pace, helping to cool wage pressure, but we are not yet seeing a broad and pronounced contraction in a wide array of labor market data.
This chart was featured in the EPB Weekly Economic Briefing, Week 23.
If you enjoyed this post and want to learn more about the EPB Business Cycle Framework or our composite index approach, check out our Free 5-Part Business Cycle Traning Series.
You are doing really great work Eric. These substack posts are awesome. Hopefully your model is to do free tibits every week and let folks subscribe to your service if they want higher level. Substack is a much better venue to express yourself than twitter, though you see I am engaging you their too. Really great stuff, keep up the good work, thx
“Cooling wage pressure” sounds like a great euphemism unless you are one of the hundreds of thousands taking part time work on top of a full time job to make ends meet. That is, if you are one of the lucky ones not laid off. There is the lagging data and then there is real life on main street. I am very middle class and the pressure in my social circle is immense. People put on a brave face but the reality is a lot of people on main street are worried about their livelihood.