July labour stats in the USA

 I talked about the blip in the US PMI/ISM data here.

These charts show the labour force data.  The first one shows the change in payrolls, the second (from a different survey), the change in the unemployment rate (inverted, because unemployment goes up in recessions and down in recoveries)  In each chart, they are compared with the average of the manufacturing and services ISM surveys, extreme-adjusted.

You can clearly see the post-covid economic recovery in 2021, and then the gradual subsidence as fiscal stimulus wears off, high interest rates take effect, and the post-covid "revenge buying" in services slows.

Will the US go back into recession?  I don't think it will, because recessions occur when there is excess---excess debt, excess inflation, a property crisis, fierce response by central banks, a collapse in consumer and/or business confidence.  But it's relatively easy for slowdowns to happen.   In an uptrend, the economy can advance more or less rapidly, producing mini-cycles.  In recessions, mini-cycles are much rarer.  When the economy plunges, it doesn't pause to take its breath.  

The bottom chart shows the rate of change in my own US leading index, designed to give forward indication of changes in direction in the economy, compared with the year-on-year change in real GDP.   As you can see, the rise in the rate of change of the leading index should be consistent with a rise in GDP growth.  And it is.  Although it is showing a small downturn, indicating a slowing in GDP growth in 2025, it's not pointing towards an imminent recession.  

But my leading index doesn't include any measures of fiscal stimulus.  And that is tailing off:  if you look at the change in the Federal deficit, the IRA led to a big increase in the deficit in 2022, and a modest retracement in 2023.   That would have provided fiscal stimulus in 2022, and fiscal contraction in 2023.  Enough to cause a recession?  No.  But enough to take the shine off the growth numbers.

So, not a recession, but very likely a sluggish recovery, with a short-term blip.