This Signal Just Triggered for the First Time in 15 Years; History Shows Last 3 Times Led to Recession
Key Points
U.S. non-farm payrolls just had their third negative print in the past seven months.
This has only happened three other times in the past 40 years.
Two of those instances were the tech bubble and the financial crisis.
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The U.S. labor market has shown signs of significant deterioration over the past year. An economy that had pretty steadily been creating 100,000-plus jobs every month has sputtered to near-stagnation.
From May 2025 through December 2025, U.S. non-farm payrolls have increased by only 93,000 jobs total, an average monthly increase of just 11,625. On top of that, the month-over-month change has been negative in three of the past seven months.
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| Month | Non-Farm Payroll Monthly Change |
|---|---|
| June 2025 | -13,000 |
| July 2025 | +72,000 |
| August 2025 | -26,000 |
| September 2025 | +108,000 |
| October 2025 | -173,000 |
| November 2025 | +56,000 |
| December 2025 | +50,000 |
Data source: Trading Economics
To provide a sense of how rare the "three in seven" signal is, it's only happened three other times in the past 40 years:
- September 1990-November 1991
- April 2001-December 2003
- January 2008-December 2010
Right now is the fourth instance of this occurring.
Image source: Getty Images.
Why is this important?
All three of the previous times this was triggered coincided with major U.S. recessions.
^SPX data by YCharts
The early-1990s recession was the most benign of the three from a U.S. stock market perspective. The S&P 500 fell by roughly 20%. During the tech bubble, the index fell by nearly 50%, but the Nasdaq-100 experienced a much deeper pullback. During the financial crisis, the S&P 500 fell by more than 50%.
With stocks still near all-time highs, U.S. GDP growing at a 4% annualized rate, and the unemployment rate still below 5%, the economy would appear to still be in good shape.
This signal, however, is suggesting much tougher times ahead.
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David Dierking has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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