For every business cycle since 1929, when U.S. unemployment data was first calculated, when the unemployment rate has gone up more than 1% in one year’s time, this has spelled recession. Moreover, the unemployment rate has never risen 1.0% in a year’s time without a recession (no false positives). The unemployment rate, therefore, is a perfect indicator of recessions. Where are we in this business cycle?
Well, the unemployment rate is up 1.4% over August 2007’s rate. Take a look at the chart below with the red line as the 1% cutoff.
From here, one can see that the U.S. is clearly in recession. This morning, I heard an economist on the radio from Wachovia saying we are not in recession. But, having seen the data, if you hear this kind of happy talk, you too have the right to be skeptical. What have you been hearing?