Friday’s weak payrolls numbers are widely viewed as confirming that the US economy is in a recession. I think they are consistent with a flat economy. A recession may be coming but it has yet to be confirmed.

A recessionary labour market is characterised by a fall in hiring and a rise in layoffs. So far only the former has occurred. Layoff announcements have been stable in recent months – see chart. This is why weekly initial claims for unemployment insurance have yet to reach the 400,000 level that would signal a recession.

Interestingly, Manpower chairman and chief executive Jeffrey A. Joerres made the same point when commenting on his firm’s latest hiring survey, showing the weakest US jobs outlook for four years. “The important change is not about reductions in workforces, like we would expect in a recessionary period, but rather an increase in the percentages of employers who are planning to put a hold on hiring.”

According to the payrolls report, aggregate weekly hours worked in the private nonfarm economy contracted at a 1.7% annualised rate in January / February from the fourth quarter. This could still be consistent with stable or expanding output, given that productivity has recently been growing at a 2% pace.

The worsening credit crisis and soaring food and energy costs have increased near-term risks but there is substantial monetary and fiscal stimulus in the pipeline. The economy may yet muddle through. Wait for layoffs and initial claims to rise before accepting recession orthodoxy.