This chart shows the Unemployment Rate, in relation to the S&P 500. Note that the Unemployment Rate is a lagging indicator. Economic contractions (recessions) lead to job losses. Economic growth leads to more demand for workers. After a recession, employers start to hire after they feel comfortable in their business outlook going forward. After the last 2 recessions, it took an average of 18 months for the Unemployment Rate to peak and start its decline. We expect Unemployment to remain high well into 2010, 2011, and 2012. Update 2012/2013: The Unemployment rate is falling slowly, mainly due to disenchanted workers giving up on searching for jobs after falling off the Unemployment tolls. Economic policies via Washington D.C. have been feckless. We expect Unemployment to continue to fall slowly, as the economy grows, and returns to a new normal.
One unmistakable point to take away from this study is the sawtooth pattern of the Unemployment chart. Unemployment rises quickly, but falls more slowly. Employers are cautious about hiring as economic growth appears.
Unemployment Rate Chart
( HINT: Click-and-drag left-to-right on the top chart (S&P 500) to zoom in to a specific date range. Double-click on S&P 500 chart to zoom back out. )