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Thursday, January 21, 2016

Is This A Harbinger of Problems Coming Soon?

Every Thursday, the statistics on new unemployment claims are released by the government.  As economic statistics go, these numbers are usually very, very unimportant.  Today's numbers, however, may prove different.  The total of new unemployment claims was up substantially from last week, and last week's number was also up.  Indeed, there has been a clear upward trend in these figures since the start of November.  Now the number of new claims is still low compared to the average of the last five years, but the trend is very troubling.  Jobs are usually a lagging indicator of recession.  We have other indicators of an economic slowdown already in place.  The stock market is in a tailspin.  The level of investment in the economy has fallen.  Some segments of the economy (like oil and gas producers) are in full disaster mode.  If job losses are starting to spike, we may already be in a recession.

The crazy thing is that if there is a recession in progress, it will undoubtedly be denied or diminished rather than dealt with.  President Obama would never want to admit to a recession during an election year.  That would be the final proof that his policies do not work and would likely guarantee a major Republican victory.  That means that rather than having some sort of effort made by the president to try to lessen the looming recession, the effort will be to postpone the worst effects until after the election.  That will also mean that when the full force of the recession hits, it will be worse.

Hopefully, these are false signals and we are just in a temporary slow growth period rather than a recession.  We should know soon.




 

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