Monday, April 13, 2009

Historical: Unemployments Relationship to A Recession

Just how bad will unemployment get before it starts to turn around? Well, we can't answer that question, but we can tell you, that the rate will likely continue to increase until the recession is over, and could still increase after the recession has ended and we are well into a recovery. Unemployment rate is a lagging indication. This means that it doesn't turn around until after the general economy has. If you look at the chart above, you can see the yellow shaded areas are confirmed recessionary periods since 1948. The blue line shows the unemployment rate for the last 60 years. It's a little bit scary looking at the last two recessions, of 2000-01, and 1990-91. The unemployment rate in both cases continued to rise 18 months after each recession ended. Besides these two recessions though, which were generally mild, the unemployment rate seems to start it's decline at the end of the recession. My prediction is that this recession will official end sometime in the 3rd quarter of this year, and the unemployment rate will begin falling probably in or around September.

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