Category: Economy
What REALLY Changed Their Tune
Payrolls, the Zero Line, and the Obvious Truth
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| By Robert Folsom |
Published: Wed, 02 Apr 2008 17:00:00 ET |
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We all know that, for at least six months, most of the monthly economic data has pointed to a slowdown (or worse). Consumer expectations slipped to the lowest number (47.9) since 1973; February durable goods orders (-13%) showed the largest one-month decline on record; several real estate and housing measures have the worst readings in the entire post WWII era.
Yet none of the above was enough to convince the majority of establishment economists to publicly acknowledge the obvious -- namely that the U.S. economy is in recession. That acknowledgement came only after an especially crucial change appeared in payroll growth.
Specifically, payroll "growth" stopped growing. The three-month rate of change in U.S. non-farm employee payrolls fell below the zero line. Now, the Labor Department released the payrolls report on March 8, and all the news stories did what they usually do, which is cite the month-to-month change -- in this case 63,000 jobs lost, the most in five years. Former Treasury secretary Lawrence Summers -- who has been the most candid of the big-name Pooh-Bahs -- was quoted saying, "I believe we are facing the most serious...economic and financial stresses that the U.S. has faced in at least a generation -- and possibly much longer."
Strong stuff, at least as far as attention-getting quotes go. But let's look again at non-farm employee payrolls. As I said, the media stories looked only at month-to-month changes, instead of looking deeper at trend-related data -- such as the three-month rate of change. Once you actually do the trend analysis, then in turn you can see where similar trends have led in the longer term data.
And sure enough, the three-month rate of change in employee payrolls has demonstrated an extraordinary track record over the past 50-plus years: in the eleven economic recessions since 1956, the three-month rate of change has fallen below the zero line on every one of those eleven occasions. It's awfully hard for me to believe than professional economists wouldn't know this, whether they talk publicly about it or not.
You can actually see what I'm describing, via the chart that's on page 9 of the current Elliott Wave Financial Forecast. It's exactly the type of information that makes EWFF so worthwhile -- see what we see via the easy steps below.
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