The latest labour force figures released by the bureau of statistics have served to reinforce that the economy is showing a severe case of wobbles. While there remain some signs that a recession is coming our way, the labour market is holding up. But the drop in the growth of hours worked is a serious concern, especially given it means underemployment is unlikely to improve.

Things can go downhill fast. A month ago, on 19 July, the market was pricing in a cut in the cash rate to 0.75% and a good chance of a further cut to 0.5%. Now it is fully pricing in that cut to happen by early next year and is predicting a 50:50 chance of another cut to 0.25% within 12 months:

What has also happened in the past month is that the bond market yield curve, echoing what has happened in the US, has gone negative – meaning that the interest rate the government pays for bonds that are for five years is lower than the rate for borrowing for two years.

It means that the market thinks interest rates in five years time will be lower than they will be in two years, and that is generally a sign of the economy slowing.

In the past that has been a very good indicator that a recession is on the way.

The yield curve went negative earlier this year just prior to the budget. There did seem to be an improvement in sentiment after the election but that has now all evaporated:

Now this does not mean we will have a recession. A number of commentators have suggested the difference between the negative yield curve this time and in the past is that employment is generally holding up well and that the negative sentiment is mostly a factor of having a madman in the White House who thinks trade wars are fun and easy.

But still, you would rather the market believes that interest rates will rise over the next five years than fall.

And there are signs that the labour market is not as good as the employment growth might suggest.

I predicted last month that the June fall in the underemployment rate was mostly a statistical anomaly due to a big drop in Victoria and that it would be corrected this month:

The Victorian underemployment rate, in seasonally adjusted terms, has gone in three months from 8.4% to 9.4% to 7.9% to 8.5%. This just serves to remind everyone not to get too excited about monthly changes in the seasonally adjusted rate and to stick with the trend.

But even here we are seeing a turn for the worse.

A month ago the trend national underemployment rate was 8.3% and falling, now it is 8.4%. It certainly suggests the picture of the past three months is worse than we previously thought:

And a big sign that things are not going all that well is the collapse in the growth of hours worked.

In July, the total number of hours worked by all employees was just 0.03% above that in June – the worst monthly growth for 18 months – and shows a divergence with the level of employment growth:

What this suggests is that jobs growth in recent times has been more for part-time work than full-time and that there has also been a slight shift of full-time employees into part-time work.

That in itself may not be an awful thing, but while it is better for people to have reduced hours than to lose their job entirely, the worry is that generally the growth of hours worked and employment moves in sync.

So if the slowdown in hours worked continues, job growth is likely to slow as well:

But it is clear that part-time work, especially for men, is outpacing the growth in full-time employment, and it reflects the decade-long trend.

We are now, astonishingly, almost at a point where the percentage of adults in employment is as high as it was prior to the GFC.

In June 2008, 62.8% of all adults were employed, compared to 62.6% now. Given our ageing population, this seemed impossible even five years ago, but what happened was a massive change in our labour force.

Since 2008 there has been a big increase in the number of women working, and the number of people working part-time.

It has meant that, while the percentage of people employed is nearly back to pre-GFC levels, the average hours worked each month by the adult population is nearly 5% lower:

With the average hours worked now again starting to fall, that will inevitably lead to rising underemployment as more workers seek greater hours.

This does not bode well for improved wages growth, and also suggests that if we are about to enter a period of slower growth, we might be looking back on the past 18 months as the good times – which, given the lack of improved household incomes, is a fairly sobering thing to contemplate.

• Greg Jericho writes on economics for Guardian Australia