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Old 05-09-2009, 05:43 AM   Nav to Top  #1
AndyB
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Default Unemployment - is it a lagging indicator?

All over the place I hear "Unemployment is a lagging indicator!". This is the mainstay of the bull case, especially this week where non-farm payrolls came in at -500k. Bulls are basically saying that since unemployment ticked up, and this is a lagging indicator, it shows recovery is underway and the markets will now follow.

-500k jobs lost in a month? Better than expected? BUY!

Anyway here's a little research I've done to demonstrate that unemployment is a leading indicator and in the previous bear market, unemployment bottomed about a year before the stock market did.



So if we are following this same scale, if unemployment continues to tick up, in our current bear market we're at the late 2002 stage, meaning after this bull run, which could last anywhere from 6 months to a year or so, there will be new lows in 2010-2011.

Be careful all and don't necessarily think the worst is behind us. The US economy is 70% dependant on consumer spending, credit and mortgages, which unemployed people just can't pay. This means there is likely more pain in the offing for the markets to come.

GLTA
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Last edited by AndyB; 05-09-2009 at 06:11 AM..
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Old 05-09-2009, 07:11 AM   Nav to Top  #2
Miles
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Default

Yeah I mean it sounds like chicken little sometimes but we can't deny that mass unemployment (10%+) + hyperinflation + housing bubble + everything else = rough waters ahead. Lagging or not I think sideways action on the Jobs reports are in order for the rest of this year and into 2010.

Hang on to your hats.
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Old 06-07-2009, 06:18 PM   Nav to Top  #3
pdtpatrick
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Default Great Report

Thanks sir.
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