We keep on seeing a myriad of economic indicators showing great signs of recovery but unemployment has not.  We have tried to defend this several times claiming that unemployment is a lagging indicator (which it is) or that the job situation in this recession isnt much worse than that of others, but the fact of the matter is that the markets have seen very robust recovery while unemployment hasn’t seen any at all.  Had the job situation turned around and continued to improve when unemployment rates shockingly fell from 9.5 to 9.4, this would have been the typical large recession that brings with it, tons of job losses.  But after 2 or 3 months, we know that that drop in unemployment rates was solely a glitch and that unemployment rates just continue to rise.  For the time being, lets look at our last graph showing that the difference between the depth of this employment situation and others is minimal at worse.

As you can see, in this recession, unemployment rates have been multiplied by 1.025 for every loss of .01 for the Dow, whereas other recessions average 1.02 factors for unemployment for the same loss in the Dow.  The difference is minimal and negligible, revealing that the depth of the current job situation isn’t much worse than that of past recessions.  However, the breadth of the unemployment crisis is far worse than that of other recessions.  The answer as to why the unemployment rate isn’t turning around doesn’t lie in how high the unemployment rates have gone but it lies in why it is lagging by an abnormal time period.  In the recession of 1973-1975, unemployment peaked exactly five months after the bottom in the Dow.  In the recession of 1981-1982, the peak lagged the market bottom by 4 to 5 months.  This begs the question, why is it that we are experiencing unemployment increases almost 8 months after the Dow bottom on March 9th 2009.

The answer lies in polling on consumer confidence and investor confidence.  In early September, a CNN poll found that nearly 90 percent of people believed we were still in a recession.   Even if we were at that time, the fact of the matter is that we were (and still are) on the brink of coming out of the recession, and it actually seems as if the recession will end sometime soon when GDP numbers come out for 3rd quarter.  Moreover, a Gallup daily tracking poll finds that 57 percent of people still believe that the economy is getting worse day by day.  With such numbers, it should come as no surprise that many businesses are still unwilling to hire more workers and thus jobs are still not being created.  The unfortunate stagnation in the job spectrum, therefore, is much much more a repercussion of popular disbelief in the economy than it is a result of hard economic facts preventing people from hiring.  Before we can turn the employment situation around, some source of optimism needs to be instilled in the populace, possibly coming from a Q3 GDP number that effectively ends the recession.