The heightened volatility in the capital markets this year has been due, in part, to concerns surrounding the possibility of another recession. While some economic data, such as Gross Domestic Product (GDP), are pointing to signs of an economic slowdown, there is one important number showing optimism that investors should keep an eye on: Jobs.
There are several reasons why, beginning with the fact that jobs are simply much easier to measure via surveys versus incorporating different analyses of the various parts of a roughly $18 trillion economy. Additionally, the stronger the job market is, the more money consumers have in their pockets; higher consumption, then, serves to fuel the economy and increase hiring as businesses expand. Finally, we are witnessing the emergence of a more skilled army of workers better suited for the current economy after either extending their stay in school or returning to the classroom after a layoff. This should increase productivity and eventually lead to more output.
Bottom line, there is a disconnect between GDP data and the jobs metric; by the latter, our economy is doing just fine and is arguably building momentum. As Mark Zandi, chief economist over at Moody’s Analytics, points out “The U.S. economy has never gone into recession unless unemployment is rising.”