Jobs Data Highlights More Recessionary Behavior

Authored by Simon White, Bloomberg macro strategist,

Employers continue to cut back on temporary employment, something typically seen in the run-up to recessions.

Temporary help services is one of the most leading components of the payrolls report. Employers typically let temporary staff go first in a slowdown before full-time employees.

Temp help fell again in June and has been contracting on an annual basis for several months, anticipating the slowing trend in payrolls we are currently seeing.

As the chart above shows, there is more to come, with total payrolls potentially contracting on an annual basis by the end of the year.

Firms are not only cutting temporary employees, they are reducing hours worked, also typical of what happens before firms start to fire people. The average weekly hours worked of all employees has been steadily falling.

Stocks and yields are currently roughly back to where they were prior to the jobs date release, suggesting the market continues to believe the Fed will prioritize inflation over growth.