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US Employment and Recessions (Short and Sweet'): A Picture Worth Thousand Words

Economics / Analysis & Strategy Dec 14, 2006 - 04:56 PM GMT

By: Jas_Jain

Economics

When Wall Street and Federal Reserve economists point to the current employment growth as a sign of the economy's health, over the next few quarters, i.e., a sign of "soft landing," they are lying because employment keeps growing until the economy is in a recession already. Fig. 1 says it all.


Any decline in employment, over a 3-Month period, and a sharp decline in the inflation rate take place during the recession itself. Average employment growth over the 3-month period, annualized rate, just before the US economy entered recessions:

1960 - 2001: 1.9%

1979 - 2001: 1.2%

Current rate? 1.2%!

Employment is a BIG lagging indicator of the economic growth. I can guarantee one thing, no Wall Street or Federal Reserve economist would dare to show you the above graph.

It is very important to note that Housing and Manufacturing lead the employment and economic weakness while Services lag the employment and economic weakness.

Jas Jain, Ph.D.
the Prophet of Doom and Gloom


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