Saturday, October 10, 2009

Unemployment Inflection Point?

The September unemployment data bring to a close another "quarter", so we now have an additional data point to compare to the naive projections made back when the incoming administration was hoping this was going to be a recession rather than the depression (four quarters of negative GDP growth) it turned out to be. [I figure "The Mortgage Panic of 2008" will make a good name for the triggering event.]

With that point, the inflection point is much clearer:

Click on the image to enlarge it significantly.

I emphasize the quarterly average because that was what was used in the original predictions, but also because it smooths out the noise in the monthly data.

The monthly data are still very noisy, but the break away from the rapid and accelerating ascent that had started a year earlier is much clearer now than it was just three months ago. The green and pink lines are explained below. [*] The noise is probably a result of the unseasonable timing of various things, whether it is the stimulus of car sales in what is normally an off season for car sales or the layoffs of teachers in the fall when they would normally be hired.

Unemployment is still going up, just not as fast as it had been. It is starting to turn over, but it doesn't look like it has turned over. It will go up a lot more when people re-enter the work force once they see jobs appear.

But the good news from this end is that I have finally seen an actual stimulus-funded construction project putting people to work. (I saw a lot more in another state, one that must have had a lot of projects ready to go, while traveling recently.) It just got started, so the stimulus effects are running about 8 months behind the starting point for that program.

Time will tell if it is enough.

As to which prediction curve applies, well, that would require correcting them so they follow the Q1 2009 data point rather than the optimistic estimate used back in late December of 2008.

The green and pink lines were described in detail elsewhere in the "Predictions" section.

The green line is a straight-line extrapolation (zero curvature) based on Q3 2008 and Q4 2008. It shows that the original blue predictions of the transition team assumed a recovery was already in progress by Q1 2009.

The pink lines are a pair of extrapolations from the actual Q1 2009 data point and the Q4 2008 point. The lower line is a straight line extrapolation (zero curvature), while the higher one assumes a continuation of the acceleration of job loss (positive curvature) that took place in the previous quarters of 2008.

No comments: