When Friday’s employment report indicated that just 130,000 jobs had been added to the August workforce and that 25,000 of those were census workers, there were sighs of disappointment from those who expected to see better numbers.
After all, 2019 job growth had been averaging 158,000 a month, and 2018’s average monthly gains had registered 223,000. There were also mutterings about the likelihood of a recession in the year ahead, an ongoing concern that had been stoked a few days earlier by one manufacturing index moving to negative growth territory for the first time since January 2016.
Of course, no one likes to hear talk about a recession, especially politicians up for reelection. Indeed, shortly after the employment numbers were released, President Trump blasted the media for emphasizing the negative:
The Economy is great. The only thing adding to “uncertainty” is the Fake News!
— Donald J. Trump (@realDonaldTrump) September 6, 2019
It’s reminiscent of somewhat-similar days back in 1978, though the economic outlook was far worse then. President Jimmy Carter, worried about his own reelection prospects in the face of a slowing economy, was wrestling with high inflation, gasoline rationing, and the sad Iran hostage situation. In the face of all this, he banned the use of the word “recession” by his staff.
As argued at the time in the Washington Post: “It is one of the conventions of American politics that no president can ever acknowledge any chance of a recession ahead. … High officials are permitted to speak of slow growth ahead. But all references to recessions are forbidden.”
This forced one of President Carter’s leading economists, Fred Kahn, to get creative when responding to inquiries about the likelihood of a recession. Instead of “recession,” Kahn used the word “banana.” For example, in discussing the relationship between inflation and a slowdown in economic growth, Kahn had this to say: “Between 1973 and 1975 we had the deepest banana that we had in 35 years, and yet inflation dipped only very briefly.”
And this brings us back to Friday’s employment report and other economic indicators that are flashing caution signals. Do we see a banana forming in the distance or is it just “fake news”?
The data do tell us that we have a slowing economy with serious weakness seen in the manufacturing sector. Not only do we see slow employment growth in manufacturing, with a gain of just 3,000 jobs nationwide in August, but also a sizable employment increase for temporary help services, with an August gain of 15,400.
Typically, employers increase their hiring of temps when uncertainty about the future increases. Taken as a whole, the employment data tell us we still have a strong but weakening economy.
So no, we have no bananas. At least as of now.
Bruce Yandle is a contributor to the Washington Examiner‘s Beltway Confidential blog. He is a distinguished adjunct fellow with the Mercatus Center at George Mason University and dean emeritus of the Clemson University College of Business & Behavioral Science. He developed the “Bootleggers and Baptists” political model.
