The Wall Street bears that have been hyping fears of a U.S. recession in order to drive down stock prices should carefully dissect the November employment report.
Because to put it as simply as possible, there ain’t no U.S. recession currently in play — it’s also unlikely in early 2019 — given the strength of the labor market. While those same bears will point to the U.S. economy adding 155,000 jobs in November as a cause for concern (it missed analyst estimates and slowed from the 200,000-plus year-to-date average), the underlying numbers tell a better story.
Yahoo Finance by the numbers: There are at least three areas of the labor report that investors in search of economic truth should assess. Taken together, they paint the picture of a U.S. economy continuing to click on all cylinders.
First, the unemployment rate for those with some college or an associate degree clocked in at 3.1%, down from 3.5% in August 2018r. Meanwhile, the unemployment rate for those with a college degree continues to be steady at 2.2%.
In other words, businesses are seeing the type of demand that warrants paying up for employees with greater skills.
The average duration of those on unemployment rolls tallied 21.7 weeks. That’s down nicely from 23.2 weeks in July. In October, the rate stood at 22.5 weeks.
And finally, part-time employment came in at 4.8 million, consistent with October. If the economy was faltering to the extent many on Wall Street suggest, part-time workers would be sent packing early on.
“The slightly more modest 155,000 gain in payroll employment in November may not go down well in markets given the heightened nervousness in recent months, but this is still a solid gain that suggests economic growth is gradually slowing back towards its potential pace. There is nothing here to suggest the economy is suffering a more sudden downturn,” said Capital Economics Chief U.S. Economist Paul Ashworth.
Jim O’Sullivan, High Frequency Economics’ chief U.S. economist, added, “ The trend [in jobs] likely remains more than strong enough to keep the unemployment rate trending down. Meanwhile, through the volatility, wage gains have been accelerating. The data likely remain strong enough for the Fed to raise rates again at this month’s meeting, although the statement and the dot plot will probably have a more dovish tone than last time.”
The bottom line: Wall Street has forgotten the technical definition of a recession. To refresh their memories, a recession is measured by two consecutive quarters of negative GDP growth.
The November jobs report says we are a long way from that transpiring. Risk on in the markets, for now.
Brian Sozzi is an editor-at-large at Yahoo Finance. Follow him on Twitter @BrianSozzi
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