Businesses use of the commercial paper market to fund short term operations such as payrolls makes it a pretty interesting indicator, possibly even a leading indicator, of strength or weakness of the job market.
If the size of the commercial paper market, as gauged by the total commercial paper outstanding, is strongly contracting, then it’s likely that payrolls are contracting as well as less short term liquidity is needed to fund the operations of a steadily shrinking workforce.
Looking at the data below you can see (click the chart below for super cool zoomable fullscreen version) that, since 2001 (… the first month available for the historical outstanding series), both the seasonally adjusted total nonfarm payrolls data and the seasonally adjusted commercial paper outstanding data have tracked together pretty well (… an r-squared of 0.84).
Further, while it should not be assumed that both series will peak and trough together, the monthly average of commercial paper outstanding fell to significantly lower lows in July, dropping 11.16% since just this June and a whopping 39.17% since July 2008.
Though the correlation isn’t perfect, the likely implication of such significant declines in the commercial paper market is for there to also be significant declines in the payroll numbers for July and throughout the summer.