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Macro Monday 14~Unemployment Rate Rise Macro Monday 14 US Employment Rate Pre-Recession Indications The Unemployment Rate tells us how many people in the United States are currently without a job and actively looking for one. The U.S. Bureau of Labor Statistics calculates and reports the unemployment rate. In basic terms it consists of the following; Survey: The Bureau of Labor Statistics conducts a regular survey of a sample of households across the country. They ask people whether they are working or actively trying to find work. Calculation: Based on the survey results, the Bureau calculates the percentage of people who are unemployed (those without jobs but actively seeking employment) compared to the total number of people in the labor force (those who are either employed or actively looking for work). Reporting: This percentage is then reported as the unemployment rate. For example, if 5 out of every 100 people in the labor force are unemployed, the unemployment rate would be 5%. At present the Unemployment rate is 3.8%. In simple terms, the unemployment rate is a way to gauge how many people are struggling to find jobs in the United States. In this respect it is an important economic indicator that helps us and policy makers understand the health of the job market. The Chart In today’s chart I will be analysing the history of the Unemployment Rate and how it has behaved both before and during recessions. The aim of the analysis is to help us understand the distinct pre-recession patterns and levels that occur prior to recession so that we can prepare ourselves should these levels be breached or these patterns play out again. These historic levels will be placed on the chart for you to monitor from today forward. Chart Outline: 1. Recessions are the red zones (also numbered & labelled 1 – 12 and on the chart itself) 2. Increases in the Unemployment Rate prior to recession are in blue. - These blue zones start at the lowest level the Unemployment Rate established prior to the recession periods in red. - Basis points (bps) have been used to show the change in the value within the blue zones (pre-recession zones) e.g. recession No. 2 The Great Financial Crisis had a pre-recession Unemployment Rate increase from 4.39% - 5.00% which is a 0.61% increase in the unemployment rate or a 61 bps increase. - Peaks: I have also included peak bps increases within these pre-recession periods (within the blue zones). These are times that the Unemployment Rate peaked higher but reduced thereafter but a recession still followed. Chart Findings: 1. In 10 out of 12 of the recessions outlined the Unemployment Rate increased in advance of the on-coming recession (in the blue zones) demonstrating that initial early increases to the Unemployment Rate can act as an early recession warning signal: - An average increase of 33.5 bps over an average timeframe of 7.3 months is observed pre-recession. - The maximum increase in the pre-recession blue zones was 71bps over 8 months. This max increase was observed prior to 1980 Volcker/Energy Recession no. 6 on the chart (this increase was from 5.59% to 6.30% in the Unemployment Rate itself – a 71bps increase). This recession was induced by Fed Chair Paul Volcker’s sudden increase to interest rates much like those that have been imposed by Jerome Powell over recent months (Volcker was appointed in Aug 1979 and got to work quick). - The max timeframe for a rising Unemployment Rate prior to recession was 16 months. This was prior to the The Gulf War Recession, no. 4 on the chart (which was considered a short 8 month softer recession). This max 16 month pre-recession timeframe has been marked on the chart to May 2024 in correspondence with today’s pre-recession blue zone timeline – so we know where a max timeline would put us (not a prediction). - 2 out of 12 times the Unemployment Rate did not increase prior to recession however it did not decrease either, it based at 0 bps or no change (No.1 COVID-19 Crash and No. 5 The Iran/Energy Crisis Recession). Whilst the Unemployment Rate did not increase, they did temporarily peak higher within the blue zones by 10 bps (No. 1) and 31 bps (No.5) demonstrating the importance of peaks and bases formed prior to an Unemployment rate ramp up and recession. I found the peak increases interesting to include because they illustrate that the Unemployment Rate can oscillate peaking higher temporarily only to form a higher low or return to its starting point, but a peak, if significant enough could be a telling indicator. The most notable peaks are the following; 62 bps (no. 12), 61 bps (no. 9), 60 bps (no. 10), 30 bps (No. 8), 31bps (No. 5) and only 10 bps (No. 2) for the COVID Crash. All of these peaks reduced thereafter within their pre-recession blue zones but a recession still ensued. A sudden increase in the unemployment rate should be taken seriously. I will include a subsequent data table chart that outlines these peaks and all other data utilized for Chart 1’s illustration and findings. We are currently in dangerous territory as we have passed the average timeframe of 7.3 months of increases to the Unemployment Rate and the Unemployment Rate increased by 40 bps over that period which is higher than the historical average of 33.5bps. We have surpassed both averages. The max historical pre-recession increase is 71 bps (No. 6) so this is a level to watch going forward. This translates to a level of 4.11% in the Unemployment Rate (marked on the chart). Similar to today’s Unemployment Rate level, there are two very similar instances in the past where the Unemployment Rate increased from c.3.4% to c.3.8% prior to recession (See RED ARROWS on chart). These both took 7 – 10 months to play out with a 10 – 42 bps increase to be established before recession hit. This is very similar to today’s levels which are at 7 months and 40bps of an increase with the 8th month being released this Friday 6th October 2023 which should be very revealing. We are now well armed with an historical chart as a reference point for any upcoming Unemployment Rate figures released in coming months. We know we have surpassed the averages in terms of timeframe (7 months) and the 40 bps increase is above the avg. 33.5 bps. We can refer back to this chart using Trading View, press play and see if we are breaching the max pre-recession level of 4.11% (the 71bps move) or other extreme pre-recession levels such as the dot.com and GFC Unemployment Rates (both marked on the chart). And if you don’t frequent the chart on trading view I will update you here regardless. Lets see what Friday brings…. PUKA
FRED:UNRATE
by PukaCharts
1
Unemployment Rate at 54 yr low-Recession soon or not?A recession is not bullish for the overall market so studying how the civilian unemployment rate behaves before a recession hits should help tune out any and all noise from talking heads. The red shaded areas in the above chart shows past recessions. The red circles within this chart are times when the unemployment rate "flattened out" before either continuing downward or made an abrupt move upward. The blue circles are "V shaped" type bottoms where there was just an abrupt jump in unemployment from one month to the next. As you can see recessions always followed or were in the process once the abrupt move up in unemployment began. The green dotted line shows the historical context of a 3.4% rate in unemployment. As you can see on the far right, the current rate of unemployment has flattened out over the last 12 months, ranging between 3.4-3.7. If you are bullish equities, you have to ask yourself...what is the macro thesis for this chart to continue downward as it did in the other cases where a recession was NOT followed by a flattening of the unemployment rate? If you are bearish equities just know that this chart can remain within this range/stay flattened for another 9-25 more months before it abruptly moves upwards (like it did in the 1950's & 1960's). Perhaps the flattening out period even extends beyond a 3 year period. Needless to say...I am on extra high alert for signs of an equity reversal based upon the above however I'm not going to fight the bullish market sentiment either. Always be nimble.
FRED:UNRATE
by Vixtine
4
For an understanding of the future, look to the past?Soft landing? 📊 Analyzing the US economy through key indicators: SP500 📉: Historically drops before a recession. Unemployment Rate 📈: Tends to spike during/after the onset of a recession. ISM PMI 🚫: Values <50 often signal a contracting economy. Yield Curve 🔄: Inversions have preceded past recessions. While these correlations are strong, it's important to remember: Just because a recession was predicted in the past based on these, doesn't guarantee one now. Markets & economies evolve. Stay informed, not alarmed. See attached chart for insights!
FRED:UNRATE
by Ox42
U.S. Unemployment crossing 20 month MA is usually very bearishHistorically, when unemployment crosses the 20 month moving average, a spike in unemployment follows in the next 12 months. These spikes in unemployment usually correspond with market downside in the S&P 500. The majority of the losses in the S&P usually happen early within the rise of unemployment. The recent rise of unemployment from 3.6 to 3.8 reported Friday September 1 2023 has put unemployment above the 20 month moving average. This is an early warning sign for a possible recession in the next 12 months.
FRED:UNRATEShort
by johnfzoidberg
Job Openings, Unemployment Rate, and S&P CorrelationsHere is a graph showing the correlations between the leading indicators of the economy, Job Openings, Unemployment Rate, and the S&P. It can be seen from the charts that the Job Openings (.a) historically begin to decline before there is any change in the unemployment rate. A simple explanation for this could be, less jobs, more people unemployed. Once the unemployment rate begins to creep up (.b); historically this has led to a sell off in the S&P.
FRED:UNRATEShort
by International_Leeroy
UNRATE Update | December 2021 - PresentThe US unemployment rate can double from here and still be within the long-term range and still below the extremes that have occurred during more recent recessions. Also worth point out that the only time we have been below this level of unemployment (higher employment) was during the Korean war in the early 1950s. Sure, we could see the rate of employment increase - that can happen. But it's unlikely, based on 75 years of data that spans everything from Post-Keynesianism, to Real Business Cycle (RBC), to Monetarism, to MMT. As such, it is safe to conclude that a lower UE rate, from "here", is unlikely. So unemployment has probably bottomed, stocks are yet to recover their December 2021 highs (19 months) and the interest rate on the US10Y is up roughly 200% (having gone as high as + 215%) over the same 19-month period and currently offering a yield of 4.049%; the US10Y maintains it's lag of the US02Y, which is currently offering a yield of 4.95%. In other words, bank lending is more constrained... Wow, even the banks are telling us there is significant risk in the market. Meanwhile a lot of folks are running around telling you how great fake-money crypto supposedly is. Maybe the banks are right about risk.... Oh! one more thing: the VIX has also reached a bottom of sorts.
FRED:UNRATEShort
by ChiefMacro
US banking crisis affects more than just banksIn the high-end dialogue session of the Tsinghua Wudaokou Global Financial Forum, Zhu Min, former vice president of the International Monetary Fund and former vice governor of the People's Bank of China, had a conversation with Ray Dalio, founder of Bridgewater Associates, on the US banking crisis, the Fed's policy path choices and Hot topics such as the impact of inflation and the causes of inflation will be discussed. Regarding the U.S. banking crisis, Ray Dalio said it is important to realize that this is a pervasive problem that affects more than just the banking industry and that it is currently affecting many banks because many of them have bought government bonds . But many entities actually bought government bonds. And, it's not just US entities that buy US government bonds, but also European entities that buy European bonds because of monetary policy, etc.
FRED:UNRATE
by tangerine111
Leading Indicators - PPI (PPIACO) vs. Unemployment (UNRATE) I wanted to highlight how the peak (downward move) in the Producer Price Index (PPIACO) typically corresponds with the trough (upward move) in the Unemployment Rate (UNRATE) (inverse correlation), as a period of Recession takes hold on the economy, & the financial markets. I also wanted to compare the above correlation with cycle tops in WTI Crude Oil (WTISPLC) , & also with respect to the OECD Leading Indicators (USALOLITONOSTSAM) — as this helps to pinpoint some of the historic baseline(s) for predicting the peak &/or trough in the business vs. market (financial) cycles. Here is the key for the attached chart(s): Top Chart Black Line (Unemployment Rate - UNRATE): *Black Vertical Dotted Line* = Recession Timing Trough Blue Line (Producer Price Index - PPIACO): *Blue Vertical Dotted Line* = Recession Timing Peak Orange Line (WTI Spot Crude - WTISPLC): *Orange Vertical Dotted Line* = Recession Timing Peak Red Shaded Areas (Recession): Indicator via @chrism665 Bottom Chart OECD Leading Indicators (USALOLITONOSTSAM): *Black Dashed Line* = Pre-Recession Indicator Peak Green Horizontal Dotted Line = Expansion Baseline (100) Orange Horizontal Dotted Line = Current Reading (98.62) Red Horizontal Dotted Line = Danger Zone (<97) Red Shaded Areas (Recession): Indicator via @chrism665 Looking at the larger picture of both charts, you can see that typically in previous periods of Recession you would see this flow of the signals (first to peak/trough, last to peak/trough): Peak - OECD Leading Indicators (USALOLITONOSTSAM) Trough - Unemployment Rate (UNRATE) *Peak - Producer Price Index (PPIACO)* *Peak - WTI Spot Crude (WTISPLC)* *Note* - As you can see PPIACO & WTISPLC are very closely correlated as demand peaks out, you then see a shift downward in WTISPLC as this is a signal of the topping of economic growth. Now let's dive close-up into each time period of recession, as we can see some linkages/similarities in the 1991, 2001, & 2009 recessions vs. the what is (likely) a 23' recession, depending how the economic , markets , & financial data plays out this upcoming year — potentially into 24'. 1991 Recession Timeline Peak - OECD Leading Indicators (USALOLITONOSTSAM): July 1987 Trough - Unemployment Rate (UNRATE): Mar. 1989 Peak - Producer Price Index (PPIACO): Oct. 1990 Peak - WTI Spot Crude (WTISPLC): Nov. 1990 2001 Recession Timeline Peak - OECD Leading Indicators (USALOLITONOSTSAM): Jan. 2000 Trough - Unemployment Rate (UNRATE): Apr. 2000 Peak - WTI Spot Crude (WTISPLC): Nov. 2000 Peak - Producer Price Index (PPIACO): Jan. 2001 2009 Recession Timeline Trough - Unemployment Rate (UNRATE): May 2007 Peak - OECD Leading Indicators (USALOLITONOSTSAM): June 2007 Peak - WTI Spot Crude (WTISPLC): June 2008 Peak - Producer Price Index (PPIACO): July 2008 2023(24) Recession Estimated? Peak - OECD Leading Indicators (USALOLITONOSTSAM): May 2021 Peak - Producer Price Index (PPIACO): June 2022 Peak - WTI Spot Crude (WTISPLC): June 2022 Trough - Unemployment Rate (UNRATE): Sept. 2022 What do you think about this macro analysis? Have we potentially been in a recession in 22' — or are we moving closer to higher unemployment (UNRATE) in 23' as the macro/market conditions worsen, & the Federal Reserve's tighter monetary conditions (liquidity & credit) take their toll on the economy? Let me know what you think in the comments below! 👇🏼
FRED:UNRATEShort
by kylemusserco
UNEMPLOYMENT RATE vs SPXSo as you see - what comes down, must go up - UNEMPLOYMENT RATE is at record lows right now and when it did that - after some consolidation - it sttarted to grow - each time this happened, SPX entered a bear market. Calculating the amount of days since the breakout of the UNRATE trend - it is a range of ~ 100 to 400 days before starting the decline on SPX - right now it looks like UNRATE has broken the trend for more than 300 days already. So the decline isn't far. We haven't seen the worst yet.
FRED:UNRATE
by TheSecretsOfTrading
Unemployment Rate vs SPXI'm just the messenger. SPX - orange Unemployment Rate - Blue Indicator - Moving Average out of Unemployment Rate This isn't a rule, as many sectors influence the market, but big crashes have been paired with a growing Unemployment rate. Here we can see that it bottomed and is consolidating - which proofs a strong economy and no need to crash - this suggests the ongoing decline was just a correction. To visualize this a bit more - I have coded a simple moving average to see when that curve will start heading up - and for now it isn't even turning up - this allows the market to push up before it starts turning. But when it will ... Hold on to your seats lads and ladies. It's gonna be a fast ride. Cheers!
FRED:UNRATE
by TheSecretsOfTrading
DEAD CAT BOUNCE in #Stocks & Risk on assets.We are dead cat bouncing. #Biden is attempting to reduce the price of oil via favourable taxes so companies will produce more oil. This could help CPI moderate. Supply chains remain crippled, so this dead cat rolls over on the next piece of bad news. This could come in the form of unemployment start to accelerate. In prior recessions, unemployment typically spikes going from very low to very high levels over a short period of months at which point, welcome to HYPERstagflation that make the 1970s look tame. The upshot is #Bitcoin and stocks can fall a lot lower than current levels. Using the rationale that Bitcoin has already fallen 75% so, "How much further can it fall?" can lead to huge sums lost. In 2014 and 2018, it fell -87.5% and -84%, respectively. If Bitcoin were to fall again to such levels, it would represent another -50% drop from -75% if it fell to -87.5% off peak, not just -12.5%. #math
FRED:UNRATEShort
by BallaJi
3
Unemployment Rate & SP500From Investopedia: Low unemployment is usually regarded as a positive sign for the economy. A very low rate of unemployment, however, can have negative consequences, such as inflation and reduced productivity. When the labor market reaches a point where each additional job added does not create enough productivity to cover its cost, then an output gap, or slack, happens. The level at which unemployment equals positive output is highly debated. However, economists suggest that as the U.S. unemployment rate gets below 5%, the economy is very close to or at full capacity. So at 3.5%, one could argue the level of unemployment is too low, and the U.S. economy is becoming inefficient.
FRED:UNRATE
by tianmu94
1