Employment report

Even with the drop in employment the new data really does not add much new information to what we knew a month ago.

Interestingly hours worked rose this month. But the first quarter average is 107.4 as compared to 107.7 last quarter. This gives you about a 1.1% quarterly drop–seasonally adjusted annual rate — for the first quarter, or what I said it should be last month. Depending on productivity this implies that first quarter real GDP growth will between -1.0% and 0.0%.

One of the little noticed developments is that nominal income growth is slowing sharply — from
both the drop in hours worked and the slowing of wage growth. Nominal income growth is a very good good leading indicator of inflation and implies that the worries about inflation are overblown. However, the slowing of inflation will trail the slowing of real growth and employment.

As far as I am concerned this data leave us in the never-never land of stagnation and close to a recession but not really in a recession — a widespread and extended fall in output, consumption and income.

Maybe the most critical thing to watch is that an inventory problem appears to be emerging in technology.

PS. edited to correct charts.