It is widely believed that the U.S. economy is heading toward a recession.
The bad news is that the belief could turn into reality very soon as multiple recession indicators have started flashing all of a sudden.
First, the Institute for Supply Management’s (ISM) PMI report for September revealed a massive contraction in U.S. manufacturing activity that dropped to its lowest level in over ten years. And now, ADP and Moody’s private payrolls report shows a decline in the pace of hiring in the private sector, sending the Dow into a tailspin as the possibility of a recession has got another shot in the arm.
The private sector created 135,000 jobs in September, more than the expected 125K, but the pace slowed amid growing signs that the labor market is getting tighter, according to an ADP and Moody’s report. https://t.co/UogC9tJK1M
— CNBC Now (@CNBCnow) October 2, 2019
Slowing employment growth is a recession indicator you shouldn’t miss
The ADP National Employment Report tracks non-farm private sector employment with the help of around 400,000 U.S. businesses that are customers of human resource solutions provider Automatic Data Processing (ADP).
The report says that private companies in the U.S. created 135,000 jobs in September, exceeding Dow Jones’ estimate of 125,000. But the bad news was that the private sector had created 157,000 new jobs in August, though that number was revised sharply lower from the originally reported reading of 195,000 jobs.
What’s more, ADP and Moody’s point out that private-sector job creation in September was the slowest since June 2019. The average monthly job creation in the private sector in the U.S. has come down to 145,000 this year as compared to 214,000 during the prior-year period, and this is a recession indicator you shouldn’t miss.
The report clearly shows that hiring activity in the U.S. is getting significantly weaker month after month as employers are being cautious about adding new jobs.
Worth noting @ADP revised down its August report, showing employers added 38K fewer jobs than 1st reported. "Businesses have turned more cautious in their
hiring…If businesses pull back any further,
unemployment will begin to rise," Mark Zandi of Moody's says in the report. pic.twitter.com/Gr2kLjXcrY
— Joint Economic Committee Democrats (@JECDems) October 2, 2019
This can be attributed to the U.S. trade war with China that’s hurting American businesses and pushing the U.S. economy closer to recession. It had been reported earlier that the trade war with China has led to a slowdown in capital investments by U.S. companies with exposure to the Asian nation.
The trade war appears to be slowing capital expenditures. pic.twitter.com/QjWIyBpWZz
— Michael R. Strain (@MichaelRStrain) August 12, 2019
This is having a domino effect on job creation in the U.S. and the state of the economy that seems to be on the edge of a recession. Moody’s chief economist Mark Zandi believes that the U.S. economy is in a very “fragile” position. As reported by CNBC:
“We are in a very critical place, kind of a fragile juncture in the economy,” Mark Zandi, chief economist at Moody’s, said during a media conference call. “What happens over the next few weeks, next few months, will determine whether there’s an economic downturn in 2020.”
Non-farm payroll data could bring more bad news for the U.S. economy
The Bureau of Labor Statistics will release the September nonfarm payrolls report on Oct. 4. Wall Street forecasts that employers added 145,000 workers to payrolls last month, but the actual data could miss that mark and strengthen the doomsayers’ prediction of a recession.
That’s because weak manufacturing activity in the U.S., a deteriorating employment index, and ADP’s private-sector report have already given us an idea that companies are pulling back from making investments. This has a direct impact on job creation as lower investments mean slower hiring, and this is evident from the fact that job creation in the U.S. has slowed down over the past three months.
So don’t be surprised if the official U.S. jobs data for the month of September turns out to be worse than expected, creating panic in the markets as the chances of a recession would increase in such a scenario.