The pace of growth for US private payrolls stumbled in August, but last month’s deceleration doesn’t translate into a warning sign for the business cycle. That’s the message in yesterday’s monthly update of the Federal Reserve’s Labor Market Index (LMCI), a multi-factor benchmark that’s designed as a comprehensive measure of the broad trend for job-market indicators. Expectations for low recession risk also finds support in initial jobless claims numbers and a markets-based proxy for estimating business cycle conditions.

A more reliable estimate of recession risk through August will arrive with the monthly update of the Economic Trend & Momentum indices that’s scheduled for later this month at Meantime, the early clues suggest that macro risk is still low for the US. The one caveat: recent turbulence in financial and commodity markets suggests that macro risk has moved moderately higher in recent weeks. Even so, the increase still falls short of a clear warning. Meantime, there’s no been no confirmation in the hard economic numbers to date, which suggests that elevated risk levels via a markets-based prism in recent weeks may be noise.

As for a broad-brush review of the labor market, LMCI increased to +2.1 in August, a seven-month high. “The LMCI generally declines during recessions and typically rises during expansions,” according to the Fed. By that standard, last month’s report suggests that the economy continued to expand through August. The upbeat message is also clear and unambiguous after translating LMCI’s historical record into recession risk estimates via a probit model. Analyzing the data with this method indicates that the broad macro trend remains positive for the US. Based on the LMCI reading through August, the probability is virtually nil that NBER will declare last month as the start of a new US recession.

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