This week will bring the government report of unemployment levels in June. Since each of the weekly reports on new unemployment claims for the month showed a level well over 400,000 claims, it is likely that the best result we will see is that June's unemployment stayed level at 9.1%, but there is a significant possibility that the rate will rise still further. If the unemployment rate rises, it will mark the third monthly rise in a row. In other words, the economy will be moving from one which has arguably just suffered a statistical aberration to one that is suffering from increasing unemployment. No one will be able to argue seriously that the rise in unemployment is anything other than a real problem.
I went back to look at how frequently in the past unemployment has risen three months in a row without the economy being either in a recession or at the edge of one (just going in or just coming out). The answer is that unemployment rises like this have happened but only very rarely. What is triking, however, is that the previous three month rises in unemployment all happened at levels either at or close to full employment. There has not been a three month rise like this starting from an already high level for many decades.
The main question, of course, is what does this mean for the economy? Are we on the edge of the "double dip"? Is this just a "bump in the road" or is it more like the pothole that ate Cleveland?
One thing is certain: if the news reports about unemployment say that the rate rose "unexpectedly", the reporter was either a fool or a liar.
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