What you're not hearing about the recession signal in temporary payrolls

Temporary payrolls peaked in July, and this recession signal has become a popular meme. Its track record is overblown (it didn't predict the 1990 recession, and it can only be luck that it predicted 2020). The narrative is attractive, as this seems to be the easiest-to-fire sector of the labor force. But it's a tiny fraction of total payrolls, with a signal generated now by a drop of just 110,000 jobs. The share of involuntary part-time workers has a better track record, and is not pointing to recession now. Total payrolls has a perfect track record, peaking precisely with each business cycle peak. Its narrative is stronger, too, because the easiest way to reduce payrolls is to stop hiring. Since July, while temporary payrolls have fallen 110,000 total payrolls have grown 3.1 million, implying that all the lost payrolls went temp-to-perm, with over a million more besides. Brainard says she sees an easing labor market, citing the good track record of temporary payrolls. She's wrong, but it underscores our call for one-and-done at this week's FOMC, and for no recession in 2023.