Friday, April 10, 2009

Changes in Unemployment Rate and Recessions

We saw in the previous post that the unemployment rate is a lagging indicator as it usually peaks after recessions end.

The YoY change in the unemployment rate is less lagging. In 5 of the past 10 recessions it peaked as the recessions was still officially ongoing. On average the YoY change in unemployment peaked 4 months ahead of the unemployment rate itself. The YoY change in unemployment peaked earlier than the unemployment rate in 6 of the past 10 recessions while on four occasions both numbers peaked the same month.

See this chart. Now I know how to highlight recessions in charts. Nice!

Added note: econbrowser looks at 4 week average initial unemployment claims and the end of recessions and concludes: "If subsequent data confirm that the 4-week average of initial claims did indeed reach its peak in the number reported April 2, and if Gordon's pattern holds up, the recovery that many of us had assumed would be quarters or perhaps even years away may instead have started by June"

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