You might have noticed, in the last several months, that a curious trend has begun to take place in economic news. Unemployment has hit a fifty year low - the last time it was this low, 3.7%, was in 1969, when the big news was not the economy but the Vietnam War. Yet if you are paying attention to the job payroll numbers, you may also have noticed that the number of new jobs created has been dropping slowly but steadily to 136,000 in September (compared to the average of about 250,000), with both July and August numbers also revised downward.

This would seem to be a paradox - both of these shouldn’t be true at the same time. In actually, it is quite possible for both to be true, because they measure different things, but the spread is also an example of hyper-employment, which is not as benign as it may appear on the surface....

Economists refer to this as churn, and at the moment churn is high. This can be seen by the fact that while wages are finally rising after having been largely static for the last decade, they aren’t rising very fast. Churn often gives the illusion that there’s a lot of economic activity taking place because of the amount of hiring, but the lack of wage pressure strongly suggests that many moves are lateral, with no corresponding rise in wages from one job to the next. During the last equity led recession (2001-03) churn played a big part in creating a similar hyper-employment scenario....

In the interim, watch wage growth and number of hours worked. If they grow significantly, then we may have dodged a bullet. However, if they stall, or worse, decline, then it is very likely that the economy is going to go south quickly.