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Unemployment: It's the Absolute Numbers, Not the Rate of Change, That Counts

Most stock analysts have been taught to analyse stocks based on rates of change:e.g., earnings growth. "Straightlining" or "flatlining" is considered useless. Yet in certain forms of economic analysis, "flatlining can be a useful excercise. This is when we are dealing with "stocks," rather than "flows."

One of these economic variables is "unemployment." It doesn't really do much good to measure "new claims" as a flow variable. That's because that's only the "input" to higher unemployment. The other side is, for want of a better term, the "re-employment" rate, the people leaving the "unemployment" pool.

The problem with unemployment is not the new jobless claims, but the almost non-existent rate of "reemployment." Until that rises, unemployment will remain high. That's as long as we have (essentially) ANY rate of new claims.