The unemployment numbers are confusing and are leaving me whiplashed. There is so much revision, you wonder if the initial number is of any use. Has anyone looked at the types of jobs gaining? Is it mostly service jobs in fast food joints, more temporary help in Professional and Business Services, and government and health care, all the same old stuff? We know that housing and auto are slowing down, so it will show up in the numbers soon enough. It definitely will show up. Besides, employment is a lagging indicator. As Ann Marshall from the California Labor Market department told me this week, “employment shows where we are now”. It is a snapshot of today, not the future. I would say it shows where we have been, as Joseph Ellis shows in his book Ahead of the Curve that employment often rises even after a recession started, because it lags so much.

Ellis says many people make the mistake of gauging the economy by employment. It’s the biggest mistake that investors make, according to Ellis. Likewise, the unemployment rate is highest when the recession ends, and instead of getting back into the stock market, people are scared off by high unemployment numbers. Employment lags by several quarters, so it is natural for it to be rising as we go into a recession.

Leading the economic cycle is consumer spending, then capital spending. Both are starting to slow.