Reply #6: unemployment is a LAG recession indicator

[happyslug]

Unemployment is a LAG economic indicator, it tells you want the economy was doing THREE MONTHS AGO. It takes a while for a company to close down do to the recession, or even to close a factory (Or a store), thus people do NOT get laid off for about 3-6 months AFTER the company has suffered an economic loss. For this reason, unemployment is NOT looked at by economists to see how the economy is going, for all unemployment shows is how the economy was going three to six months before.

What economists look at are the Sale of "White goods" i.e. expensive household items and automobiles. Basically if an employees feels he may be laid off within the next year or so, and his refrigerator (or stove, or Furnace, or other major appliance, which includes Automobiles) breaks down and he or she has to choice between buying new or repairing the old, an employee facing a lay off will go for repairing what is broken and hope it last to when things are better. On the other hand if the employee is secure in his job, he or she opts to buy new, on the grounds he or she will NOT have to worry about it breaking down in two to three years.

This has been known to decades (and there are records of economists in the 1800s using white good sales to see how the economy is going). This was well established by the time of the Great Depression. What you look at is the sale of white goods and automobiles NOT unemployment to see how the economy is going. The media does NOT push this the last few years for the economy has been in a recession for quite a while if you look at the sale of white goods. The old rule of thumb was three months of sale declines in white goods, meant you were in a recession. One or two months just some bad time but the economy might pop back up, but three months was a kiss of death.

As to unemployment, no one looks at that except on how to get it down. Unemployment indicates what the economy was doing three to six months AGO, thus these unemployment number reflects how the economy was doing up to and in the Christmas rush. It was bad then, so unemployment is bad now. You had sales close to Christmas that saved some retailers from bankruptcy (and some jobs today) but as a whole NOT a good economic outlook.