Deutsche Bank Chief Economist Joe LaVorgna thinks the May jobs report could represent a bottom in payroll cycle.
In a note to clients this afternoon, LaVorgna observes that payrolls have become so lean that there is little added productivity employers can wring out of their workers.
“We doubt this can continue for any length of time because payrolls are so lean to begin with and there has been so little capital deepening,” he says. “Thus, even if we assume the economy “muddles through” for a bit longer, employment gains should accelerate. Recent history supports this view as well.”
But his view is supported by the hiring trends over 2010 and 2011, which also recorded strong gains at the start of the year before slowing substantively. And those re-accelerations have been happening earlier and earlier.
From his note.
In 2010, payrolls peaked in April, bottomed in September and re-accelerated in October. In 2011, payrolls peaked in April, bottomed in May and then meaningfully re-accelerated in September. This year, payrolls peaked in January, and we are wondering whether last month was the bottom, which it may be.
Photo: Deutsche Bank