My private sector index looks ..... terrible

I've updated my composite index of private sector data sources.  They now are (equal weights):

1. The whole-economy ISM index
2. The whole-economy PMI index
3. The University of Michigan consumer sentiment index
4. The Conference Board's consumer confidence index
5. The LMI logistics index
6. ADP's monthly job change
7. Challenger's monthly job losses
8. "Jobs easy to fill", from the NFIB survey (data only through September; October values out this week)
9. "Jobs are plentiful" from the Conference Board survey

I've plotted the resulting index after extreme-adjusting it, mainly to remove the massive down-spike during the Covid Crash. 

It looks more bearish than my previous index.  In fact, it looks terrible.

[Here is my first piece about my private sector data index]

For the data nerds among you, here's the chart of the index before and after extreme-adjustment:

Friday's US labour market stats likely bad

The ADP job gains data are reasonably well correlated with the payrolls survey.  The relationship isn't perfect, but it's good enough to suspect that the upcoming official payrolls report (due out Friday morning US time) will be bad.   The ADP data are more important than usual right now, because of the Federal Government shutdown; the jobs report is unlikely to be released.  The ADP data come from a company which processes payrolls for the private sector, so it excludes changes in the public sector, which are, if anything, likely to be worse.

Employment is now falling.   That is the very essence of recession.

US employment accelerates

January payrolls data showed an acceleration in employment in the USA.  This is consistent with the rebound in the ISM & PMI surveys.

From the Fed's perspective, this means they can wait before cutting rates.  If employment growth had slowed, or gone negative, they would have felt the need to start cutting the Fed Funds rate soon, especially as inflation is still declining.  They can be more cautious now.

From the Democratic Party's perspective, this is good news.  Incumbents tend to win elections if economic conditions are improving.  If this continues for the next few months, and ignoring all the other factors, Biden's re-election chances have improved.

From the point of view of the share market, these data mean that optimism about rate cuts should lessen, while profits forecasts should improve.   Net balance:  the market should continue to trend upwards for the next couple of months, if more slowly.

From an ordinary worker's perspective, this is excellent news, especially since wage growth ticked up a little.

Once again, never underestimate the economic benefits of government spending initiatives.