Friday, September 5, 2008

About Today's Jobless Claims

Originally published on 9/4/08
9/5/08 Update - Chart updated to reflect today’s BLS unemployment report
(The unemployment rate rose from 5.7 to 6.1 percent in August)

For those concerned with today’s jobless claims :

1) Sure, it’s bad news.

2) But, it is not unexpected. And it should be put in perspective.

The Conference Board, like many others, expects the unemployment rate to continue to rise in the near term. In fact, the Conference Board currently predicts unemployment will reach an average of 6.2% for the second quarter of 2009 before beginning to drop.

3) Where recessions are concerned, unemployment is a lagging indicator. It is not a window into the future, it is a look into the rear view mirror. Unemployment often continues to rise well after the end of a recession. The 2001 recession fit that pattern:

Click the image to enlarge it and view the source data:
Click the image to enlarge it and view the source data
Current conditions appear to be a slowdown, not a recession.
But, the same “lagging indicator” principle applies.
Whatever current job losses are telling us about the larger economy,
it relates to the past more than the future.

Regarding the question of a recession,
in my primary post on this topic, I have noted that:

“A typical recession will see at least
‘a two-point rise in unemployment to at least 6%’.
Unless we reach 6.4%, that standard will not be met!”
4) Bottom line - Expect many more such headlines for months to come. But, keep the big picture in mind. The sky is a bit cloudy (in some respects). But it is most certainly not falling!

It helps to put current unemployment rates in historical perspective.
Click the image to enlarge it and view the source data:
Click the image to enlarge it and view the source data

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