by Calculated Risk on 1/04/2008 08:31:00 AM

Update: This graph shows the unemployment rate and the year-over-year change in employment vs. recessions.

Click on graph for larger image.

The rise in unemployment, from a cycle low of 4.4% to 5.0% will set off alarm bells.

Also concerning is the YoY change in employment is less than 1%, also suggesting a recession.

Employment numbers can be heavily revised, but this report will definitely get attention.

Original Post: From the BLS: Employment Situation Summary

The unemployment rate rose to 5.0 percent in December, while nonfarm payroll employment was essentially unchanged (+18,000), the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Job growth in several service-providing industries, including professional and technical services, health care, and food services, was largely offset by job losses in construction and manufacturing. Average hourly earnings rose by 7 cents, or 0.4 percent.

Click on graph for larger image.

Residential construction employment declined 28,500 in December, and including downward revisions to previous months, is down 293.1 thousand, or about 8.5%, from the peak in March 2006. (compared to housing starts off almost 50%).

Note the scale doesn't start from zero: this is to better show the change in employment.

This second graph shows starts, completions and residential construction employment. (starts are shifted 6 months into the future). Completions and residential construction employment were highly correlated, and Completions typically lag Starts by about 6 months.

This suggests residential construction employment could fall significantly from current levels.

Overall this is a very weak report, and the unemployment rate rising to 5% will set off recession arguments.