Jobs are coming back as the economy continues to recover from last year’s economic shutdowns. At least that’s what the data says. But the data might simply be showing recovery because last year was so bad.
Help wanted ads have always been a leading indicator of employment. Years ago, these ads were in classified sections of newspapers. Now, help wanted ads appear online, often on websites dedicated to employment opportunities.
One source of this data is the Federal Reserve database which maintains an index of posting for jobs at the website Indeed.com.
Analysts should gain valuable insights from this data because the information is collected in real time and isn’t revised. It’s one of the few immediate snapshots of the economy.
The chart below shows the index for all job postings on Indeed. This index compares the number of postings in the last week to the number of postings in February 2020.
New Indeed Job Postings
Source: Federal Reserve.
Behind the Curtain, Economic Data Shows Recession Still Possible
The index is up 37.1% compared to February 2020 — a seemingly solid recovery. But it ignores the fact that the economy was already in recession before the pandemic shut down businesses.
Other economic data will face similar problems. Inflation data in the coming months will compare current prices to the prices seen when the economy was almost completely closed. Employment and GDP growth will be rapid when compared to the same months in 2020.
This is a problem since we should not compare the current conditions to a once-in-a-lifetime catastrophe because data will appear to be better than its reality.
Federal Reserve officials will tell us to ignore transitory inflation. Politicians will tell us their policies led to the most robust recovery in history.
As investors, we need to ignore the rhetoric and focus on the numbers.
With the Indeed data above, the index flattened at the beginning of March. A new high will be bullish for the economy. Failure to reach a new high will be a sign the recovery is turning into a recession.
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Michael Carr is a Chartered Market Technician for Banyan Hill Publishing and the Editor of One Trade, Peak Velocity Trader and Precision Profits. He teaches technical analysis and quantitative technical analysis at the New York Institute of Finance. Mr. Carr is also the former editor of the CMT Association newsletter, Technically Speaking.
Follow him on Twitter @MichaelCarrGuru.