Friday, April 17, 2009

Jobless Claims Suggest Recession’s End Could Be Near

We'll be watching for verification, one report does not a recovery make. There are a lot of cross-currents in the economy right now and we are definitely not out of the woods yet.
From the Wall Street Journal:
Amidst all the data, models, and sophisticated tools that today’s economic forecasters have at hand, there’s one simple series with a pretty impressive track record for predicting when recessions are coming to an end: jobless claims, a weekly tally of how many new claims Americans are filing for unemployment benefits, released every Thursday by the Labor Department....

...Robert J. Gordon, an economics professor at Northwestern University who sits on the committee tasked with dating recessions, is one who finds enormous value in this series. Going back to the late 1960s, he has found that the four-week average of new claims peaks about a month before the declared end of recessions with remarkable accuracy.

As of right now, the four-week average claims series peaked at a level of 659,500 in the week ended April 4. If that number holds, based on the series’ past performance it would mean the recession ended somewhere between late March and early May – a far more optimistic read on the economy than any consensus forecast (the latest WSJ survey of economists shows on average they expect the recession to end in September). “The end of the tunnel may only be weeks away,” says Mr. Gordon....MORE, including caveats.

HT: EconomicPolicyJournal