STA Composite Employment Index Shows Jobless Rate Will Surge, Not Drop, From Here

by: Michael Panzner

If you ask Wall Street analysts, strategist, economists, central bankers, and sundry other highly paid experts where the U.S. unemployment rate is headed next, most will say lower, with even those who are less sanguine about the outlook suggesting we are nearer the top than the bottom as far as jobless tallies go.

However, a post at StreetTalk Live's Financial Blog, "Why Unemployment Is About To Surge," citing one data series stretching back decades, predicts exactly the opposite. The reason, according to Lance Roberts, is that every time the STA Composite Employment Index [an average weighted index of the employment components of the Chicago Fed National Activity Index, seven different regional Federal Reserve manufactuing indexes, and the National Federation of Independent Business survey] drops to a level of 5 or less, the economy has been in a recession. Of course, it is during recessions that unemployment claims rise sharply as businesses cut back on their labor force to reduce costs. This is clearly seen in the chart.

Sta-composite-employment-index-vs-claims-090111

It's hard to argue with that (except if you've got a vested interested in the Wall Street pump-and-dump, of course).

Hat tip to Zero Hedge.