Nonfarm payrolls were reported to be down 80,000 in March, following declines of 76,000 in both January and February. Three consecutive monthly declines in payrolls is a noteworthy development, and a strong indication of recession. Those recent monthly payroll data are depicted by the orange line to the right in the accompanying chart.

A review of the historical record (red line, green line, blue line) shows consecutive declines in nonfarm payrolls being characteristic of the past three recessions. Recession months are in bold.

The red line in the attached chart shows the monthly changes in nonfarm payrolls during the economic slowdown that included the recession which officially started in 1981.

The green line depicts the behavior of the monthly change in payrolls during the slowdown that lead to the 1990 recession, and the blue line depicts the behavior of payrolls prior to and during the 2001 recession.

While recent payroll developments bring us in to recession territory based on the past, we have yet to see the 300,000 monthly job losses seen in prior cycles.

In addition, the detail in the March employment report is stronger than the headlines suggest as: 1) aggregate earnings point to strength in the wage & salary component of personal income, 2) strength in non-auto manufacturing hours worked points to strength in core manufacturing industrial production, and 3) strength in aggregate hours worked in the construction industry opens the door to the possibility of improvement in building activity.

Mark Serlin is the Chief Economist at Economic Strategies Inc. Prior to joining Economic Strategies, Mr. Serlin authored the widely distributed SERLINON economic indicator analysis service for Bridge Information Services. Mr. Serlin has also worked in the research departments of Bear Stearns, Ried Thunberg, and Manufacturers Hanover.