Today’s report suggests that the employment data is following the same pattern we saw last year, when employment was very weak in the summer, but then took off in the early Fall. My own view is that the best explanation for this is a seasonal one. It is typical for firms to bring in lots of seasonal workers in the summer, and then let them go in the fall. Given how weak demand has been, firms are still likely holding on to excess labor capacity; that is, they are hoarding labor. Because of that, they do not need to hire a bunch more workers in the summer months. When they do not, they summer employment number looks weak after seasonal adjustment. Later on, the normal seasonal pattern is to let folks go, but that isn’t happening either, since the extra workers were never hired in the first place. So the number in the fall looks high.
I would expect the October numbers a month from now to show the same pattern. That means today’s number is not as good as it looks, and the summer numbers were not as bad as they looked (especially after some nice upward revisions). Having a good reason to discount the summer weakness is a positive development, of course. The odds of recession just dropped a good bit.