Recession: Have We Now Gotten A Clear Warning?

Today's nasty jobs reporthas Wall Street buzzing again about the possibility of a recession, since jobs are viewed as a lagging indicator. The unemployment rate jumped to 5 percent from 4.7 percent in November.

Non-farm payrolls for December came in at a dismal 18,000, compared to fairly low expectations of 50,000 or more, meaning this is the fewest number of new jobs in more than four years.

While we do not hear many calling for an out and out recession, it is true that strategists have become more cautious about the possibility of recession. In CNBC's Trillion Dollar Survey,released Thursday, strategists and economists saw an increased chance of recession but were not forecasting one.

Of the 60 respondents, 58 percent said there is a 50 percent likelihood in the next 12 months that the U.S. could dip into recession. In September, only 17 percent thought the chances were 50 percent, and at the time, 80 percent believed there was just a 25 percent possibility of recession.

We thought we'd take a look at how jobs data correlates to recessions. CNBC Chief Number Cruncher Ariel Nelson came up with the following report, using charts supplied by Haver Analytics. The data goes back 50 years. The first shows the trend in non farm payrolls. The second shows the correlation between recessions and declining employment levels.

Nonfarm payrolls - past 50 years:

In the past 50 years, we have had 7 recessions.

Recessions (gray bands) occur as payrolls flatten or begin to decline (we are still in positive territory, adding 18K jobs).

Troughs typically come well after the recessions have ended, as payrolls are a lagging indicator.

Payroll declines do occur without recession, but do so sporadically - in June 1986, payrolls lost 93K jobs after adding 125K the preceding month and 318K the following month.

In the past 50 years, we have had 7 recessions.

Recessions (gray bands) occur as payrolls flatten or begin to decline (we are still in positive territory, adding 18K jobs).

Troughs typically come well after the recessions have ended, as payrolls are a lagging indicator.

Payroll declines do occur without recession, but do so sporadically - in June 1986, payrolls lost 93K jobs after adding 125K the preceding month and 318K the following month.

Questions? Comments? [e-mail]