Employment Data Confirms Economy Is Slowing

2025-05-09 08:40:00 ET

Summary

• While coming in much stronger than expected, the latest employment data confirmed what we already suspected: the economy is slowing.
• Given that full-time employment provides the resources for excess consumption, that ratio should increase for the economy to continue growing strongly.
• Employment growth remains strong enough to support economic growth and quell concerns that CEOs are withdrawing from the job creation process. However, compensation continues to decline as economic demand slows.

While coming in much stronger than expected, the latest employment data confirmed what we already suspected: the economy is slowing. The reason the employment data is so important is that without employment growth, the economy stalls. It takes, on average, about 200,000 jobs each month to keep up with population growth, which ultimately keeps the economy growing. That is because, as discussed in last week’s #BullBearReport , the consumer comprises about 70% of economic growth. To wit:

“ There is currently no evidence that the economy is slipping into a recession. However, if you want to know if an economic decline will evolve into a recession, there is one key factor to consider: consumer spending. Consumer spending comprises nearly 70% of the GDP calculation, and everything else, from business investment to imports and exports, is a function of the consumer’s “demand.” In other words, if the consumer is slowing down or contracting spending, businesses will not “invest” in expansion projects, increasing employment, or buying more products for resale. That relationship is shown in the chart below, which compares PCE to employment and private investment.”

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