Why Unemployment Is About To Surge…(And Civil Unrest With It!…)
by Lance Roberts
Unemployment is potentially set to rise sharply in the coming months. That is a pretty bold claim on the surface and one that flies in the face of both mainstream economists, and the White House which is about to unveil a new “jobs plan”.
Let’s take a quick look at some numbers: 8, 160, 400, 350, 12 and 5. There have only been 8 weeks out of last 160 weeks that unemployment claims have been below 400 thousand claims. In normal circumstances we are worried about recessions when claims are rising above 350 thousand claims. Furthermore, jobless claims tend to plunge below 350 thousand a week within 12 months after the end of a recession. Currently we are still holding above 400 thousand claims after more than two full years since the recession statistically ended.
Those are some pretty ugly numbers, but the most important number is 5. The reason that we think unemployment might move sharply higher is that every time the STA Composite Employment Index drops to a level of 5 or less the economy has been in a recession. Of course, it is during recessions that unemployment claims rise sharply as businesses cut back on their labor force to reduce costs. This is clearly seen in the chart.