Friday’s jobs report could aptly be described as a stinker. Month-over-month employment growth came in at +138K, a fair bit below analysts’ expectations. Early month’s growth figures for 2017 were also revised lower, to +50K for March and +174K for April. The May results beg the question – is the economy header for a recession, or have simply just seen a few weak months of growth (after all, +138K net new jobs is still a good figure by most measures)? The answer to this question, of course, depends on the respondent.
Source: BLS
Acknowledging that recession and boom forecasting has a fair amount of art contained therein, one might wonder if perhaps a sector of the economy acts as a leading indicator to where the economy is heading. Since the financial industry employers a large chunk of economists and financial analysts, one might guess that employment growth in the financial sector may provide a leading indication of where the economy is heading.
So, what do recent results from the financial sector portend for the future of the U.S. labor market? Here’s a look.
The Financial Jobs Picture
First, a look at the financial jobs picture on a month-over-month growth basis. Interestingly, the financial employment chart looks surprisingly similar to the economy-wide employment chart.
Source: BLS
Here’s a look at two together on going back to the year 2000. They move so closely together that it’s difficult to tell whether one could be a leading indicator for the other.
One interesting aspect is how much of a laggard the financial industry has been this time around compared to the economy as a whole. While overall employment is far past its prior boom’s peak, and has been since mid-2014, financial employment is just now getting back to where it was in 2007, the year when the economy headed south.
Source: BLS
The Financial Jobs Picture’s Connection with the Overall Economy
The previous charts show visually what is likely to be the case – the financial industry moves lock-step with the overall economy and probably doesn’t have any better information on where the economy is heading than professionals in any other industry. Too bad for all those CEOs in the financial industry employing all those high-paid economists. Perhaps they just need to pay more attention to their economists?
Conclusion
Last Friday’s employment report came in much weaker than expected, although still at a healthy +138K in net new jobs. In looking at whether the financial industry might be a leading indicator of where the overall employment picture is heading, it appears that the financial industry tends to just move in sync with the overall economy, rather than provide an early indication of where the economy is heading.
Perhaps financial industry employers don’t have much more information about the state of the overall economy than any other industry.
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