Why the unemployment number are Bullish...unemployment numbers were released earlier today they missed substantially from estimates of 978,000 jobs came in at 266,000 the big number here which surprised me is that manufacturing jobs dropped by 18,000 so that traction that we’ve seen over the past several months is one away completely.
Let me address why I think the markets are doing better today. I believe there was a great fear that we are overheating in the economy and this shows that this is not happening one of the other things I want to mention here which is important is that my expectations that I discussed on the Livestream on YouTube on Wednesday were that we would have at least one or two more months of good employment numbers and then it would flatten off and the Fed would struggle to get things to move forward.
So this is going to put a lot of pressure on states and federal government to get the country open and moving forward. This sets the tone for the possibility of more stimulus in a classic scenario of bad news is good news.
Looking at the long-term employment chart this is important also to look at as the average between the high and low going back to 1949 is 6% so we are at 6.1 everybody was expecting this to drop down to 5.8 today so we are actually in the mean of were employment normally exist over time. So we tend to get a few points below 6% in a few points above and those periods of time are considered to be booms or recessionary periods depending on how much above or below these lines we are at.
My expectations are now that we did get this bad report is the report for May when it comes out next month this is going to be important to keep a close watch on as if it does not down tech below 5.8 then this is likely to become a big issue with the Fed trying to stimulate the economy. I think will begin to see and hear more rhetoric from the treasury/Janet Yellen over the next several weeks if they are seeing numbers in the background that we can’t see that are concerning them.
In summary, this is why I believe the markets are doing better today and will continue to do better as folks will be expecting to see some noise starting around possible new stimulus and other things that are likely to help push the new infrastructure bill through.
UNRATE trade ideas
Civilian Unemployment Rate - V1Continuing on my exploration for signs of economic trouble ahead (or not?) I thought I'd take a look at the Unemployment rate figures, assuming they'd follow patterns like everything else.
Well, they sure do seem to....
I've forgone my normally Fibonacci delving in the timing intervals and just used some basic extrapolation, as it's made all the harder by Trading View not correctly accounting the date across the bottom past the current date, but the timings make logical sense in regards to longer economic cycles, with more and more violent ups and downs.
Anyway, enjoy, comments / thoughts always welcome.
UNRATE - Dangerous low levelsLow levels of unemployment normally mean that the economy is at its best and that all companies are fully hired and investors have been investing a lot to grow businesses. The danger is overinvesting and a very competitive environment which backslash in this euporic low levels of unemployment. These are well correlated to economies topping as the tipping point only means to fire people and turn into a downward trend again.
Additionally the negative rates from the European Central Bank have sparked a lot of debate and there is no more further room for quantative easing if a economic collapse occurs. A recipe for distaster if you ask me, we will see it come around and most of the time act too late. There is no escape from it.
Unemployment Rate Overlayed Federal Funds RateOne must admit it is remarkable where the unemployment level was pre-covid. There would have been a considerable melt up within the market at peak employment like that.
It is a trying state of affairs as the unemployment rate is viciously targeting various sectors relentlessly.
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Covid Depression 2020 reached point of no return? URATE at 14%.The Awesome Oscillator (graph below) went from negative to positive this month (MAY 2020). The last two times this happened in 2001 and 2008, recessions hit the US and the world economies were shacked. Is this the starting point of the downward acceleration spiral?
Unemployment as an indicator for Recession or DepressionsI've put together this simple chart to try to visualize how the unemployment rate may be an indicator of what's to come. When credit flows and people and companies can get debt to drive growth, you get more spend, more income, more highers, more employment, more jobs. However, as this starts to slow, it starts to drop, leading to potentially the economy slowing down. Companies stop hiring, and eventually firing. It might be interesting to get LinkedIn data here, as they probably have this dynamic reflected in Open Positions and People looking for jobs. What are your thoughts on the graph? Any other way you'd calculate the rate of change of the graphs (inflection points on employment/unemployment)?
US unemployment rate with 12 month MA versus SP500This indicator has proven a fairly one as to turns in the market over the years and if (and it is a big if with the situation ever fluid and the US chucking literally trillions to keep the economy afloat)) but if this Covid-19 pandemic does send the US into a recession and the unemployment rates up with it then perhaps we shall have to start looking for a more protracted decline in the markets. Lets hope it doesn't.
Unemployment looks like it's about to skyrocket.I hope I'm wrongI don't hear to much debate about what part of the business cycle we're in. We were in the part of the cycle when no profit generating companies go parabolic ( the of the cycle if you don't get the reference). This unemployment chart suggests we might be in for some darker days ahead.
Stay safe.
Unemployment Rate Recession correlatesThe 9/15 month MA that I posted previously combined with an additional specific event, an increase in unemployment of 0.6% from a recent low, better correlates with recessions since the 1950s than just the MA crossover. The crossover has in recent history preceded recessions while the 0.6% increases happen before, along with the start of of in the first 3 months of a recession. Currently neither of these events has occurred.