We are currently experiencing a pre-election surge in all economic metrics; and then comes the hangover as can be confirmed by looking at hiring plans. Morgan Stanley’s Business Conditions Index (a multi-factor real-time bottom-up economy tracker) has tumbled this month, giving back most of the very recent gains but it is the ‘outlook for hiring’ that is the most worrisome. Despite the stronger than expected employment report for October, both hiring indices fell to multi-year lows. The hiring index dropped 10 points to 44%, its lowest since December 2009, and the hiring plans index sunk 13 points to 44%, lowest since August 2009. Due to its leading indicator nature, this means that imminent payrolls may not stop rising; but in a few short months will post the first sequential decline since 2010. What this means for the unemployment rate is self-explanatory – but by then the election will be decided.
Source: Morgan Stanley