US Payroll Data Implies World’s Largest Economy Faces Recession Next Year (NOT this year)

Should current trends in US employment data continue, at their current pace, it implies a US recession will start at the end of this year. Actually, that is up to six months later than most economists currently predict.

AKRO's preferred method of looking at the economic performance of the world's largest economy is to look at trends in US payroll data, in particular non-farm payrolls, which excludes the seasonal impact of agricultural employment. This broad based economic indicator, released on a monthly basis, often better reflects economic reality than the official GDP data, which released quarterly, with a lag, and often subject to large revisions.

The chart shows both the total number of non-agricultural employees (top) and the 12-month rate of change in that figure (bottom). Traditionally, when the year-on-year rate of employment growth drops below 1%, it has been an accurate indicator of recessionary conditions. If current trends persist, the US will fall into recession at the end of the year, 6 months later than many economists [1] currently predict.

Jeremy Monk

Investment Director,

AKRO investiční společnost, a.s.

[1] Bloomberg Survey as at 6/6/2023: Q3 2023 real GDP -0.5%, Q4 2023 real GDP -0.4%, Q1 2024 real GDP +0.8%, Q2 2024 real GDP +1.6%

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