“Cyclical Downturn In Jobs Growth” – Business Hiring Plunges To Seven-Year Low

Last month we themed a piece detailing how Wall Street is completely ignoring the cyclical jobs growth downturn as the Economic Cycle Research Institute’s (ECRI) employment indicator plunged to levels not seen since the 2008 crisis. 

ECRI’s Lakshman Achuthan sat down with CNBC’s Michael Santoli in mid-September to discuss the downturn in employment growth. 

Achuthan said, “there’s a “very clear cyclical downturn in jobs growth, there’s really no debating that, and it looks set to continue.”

One month later, the National Association for Business Economics (NABE) is whistling Achuthan’s same tune of an alarming trend where hiring by US companies has plunged to seven-year lows, and salary growth has stalled, reported AP. 

NABE reported that only 20% of the managers surveyed said their companies had hired workers in the last three months. 

The latest figures are down from 33% in July. Job totals were unchanged at 69% of companies, up from 57% in July. A broad measure of job increases in the survey dropped to its lowest level since October 2012.

January 2019 marked the cyclical peak in employment growth, has been moving lower ever since, and the trend is far from over as the economy continues to decelerate into 2020. 

The employment downturn comes as US consumers pulled back on spending in September, an ominous sign that the manufacturing recession is spreading to the consumer segment of the economy, which accounts for 70% of GDP. This means the government and Federal Reserve failed to contain the manufacturing recession, as it now signals the economic slowdown is broadening. 

The downturn in employment growth will start to weigh on consumer confidence this quarter and in the quarters ahead. 

There’s a reason to believe that cyclically sensitive sectors will feel the brunt of the slowdown as the consumer goes into hibernation mode ahead of the holiday season. 

“The US economy appears to be slowing, and respondents expect still slower growth over the next 12 months,” said Constance Hunter, NABE president and chief economist at KPMG.

Simultaneously, NABE said business investment in capital expenditures, like heavy machinery and computers, is the lowest in five years.

Many of the companies surveyed blame President Trump’s trade war for the slowdown, but as we’ve outlined before, the downturn started several quarters before. 

About 19% of the respondents said they lowered their sales forecasts for 2020 because of the trade disputes. Those who said the tariffs had affected their sales have pushed higher costs to their customers. 

Later this week, employment data for October is expected to disappoint. The economy could add sub 100,000 jobs, compared with September’s 136,000 jobs. The decline could be the result of the massive UAW strike, where tens of thousands of GM workers have been striking for the last month.