I learned from Guy Berger just yesterday that the Census Bureau is now publishing the results of a new survey called Business Trends and Outlook Survey (BTOS). I am not sure how long this has been the case. But the survey is conducted twice a month, which makes it slightly more up to date (currently to November 3) than much of the hard data covering the concepts that BTOS surveys. And more importantly, BTOS includes forward looking indicators measuring business intentions.
Among many other things, they work up diffusion indexes measuring the change of employment across firms during the past two weeks and then prospectively over the next six months. The run of data is short, although the sample size is large. So, it is impossible to know if these series will end up being incremental.
In any case, the chart below shows these two variables on a dual vertical axis chart, because a variable measured across a window six months wide might be expected to have more volatility than a similar variable measured across a window two weeks wide. For whatever it is worth, these data hint at two things in particular:
- The breadth of employment growth measured across firms has improved since August, although not dramatically. This provides further support for the view that the sudden weakness of aggregate employment growth during August was a one-off caused by the hurricanes. We might say hurricane take is consensus. But having checked the consensus – so far – it might not be quite. If underlying employment growth is 150k, and if there was a 150k hit from the storms in October, then the consensus guess for this month might be 300k. In fact, among the 3 guessers populating Bloomberg, the estimates are two for 175k and one for 250k. Maybe there is some conservatism bias there relative to what people think. Or maybe people think the storm effect was real but lower than I assume.
- Businesses increasingly believe that they will raise their headcount over the coming months, which would presumably imply quickening employment growth if the expectation were realized. In my view, that would be a big deal for the following reason. The idea that there are lagged effects from the earlier tightening of Fed policy still to hit spending directly seems increasingly implausible, although Powell has only recently begun to back away from that exotic claim. One remaining issue, though, is that there has been labor hoarding (relative to current demand conditions) because companies have recently had trouble hiring. The worry is that companies might suddenly decide to right size their employment, even if their business flow remains little changed. And that could feed into weakness in spending growth down the line, even if financial conditions themselves are not pressing directly for that result. If people were to decide that employment growth is accelerating, that could lead to an abrupt macro view change, probably more so now than in the typical case.
The next BTOS is slated to be released in two days, and its results will be almost entirely post-election.
Not suddenly weaker, at worst
Source: Census
Data are to the two weeks ending Nov 3.
