Review:
On August 23, 2009, in our call that the recession was over, we said the following (when the unemployment rate was at 9.60%):
“I doubt that the general public will agree that the recession is over since jobs will not be as plentiful as the past.”
From the low in 2009 to 2014, many questioned the rising stock market and economy because job growth was not as strong as hoped. However, it should have been understood that to achieve such accelerated job growth comes at a very expensive price.
On July 2013, we said the following of the unemployment rate (when it was at 7.30%):
“It is important to understand that the 10% and 3.8% unemployment rates are undesirable scenarios. The 10% unemployment rate is in the depths of a ‘recession’ and the 3.8% unemployment rate at the height of a overextended economic boom.”
On August 24, 2018, we said the following of the unemployment rate (when it was at 3.80%):
“Presently, we anticipate the unemployment rate rising to the 6.30% level as a natural reaction to the current low levels. While the unemployment rate can go lower, there is a tremendous tradeoff to achieving lower levels. It is quite possible we have seen the best of times with a declining unemployment. Anything below the current levels will come at a tremendous cost in the next recession.”
On March 26, 2020, we said the following, when the unemployment rate was at 4.40%:
“According to the Washington Post dated March 23, 2020, the projected unemployment rate is likely to range from 9% to 30% based on the fallout from the coronavirus (COVID-19). Our August 2018 projection of 6.30% remains, as it is the first stopping point to any higher level beyond Goldman Sach’s 9% or St. Louis Federal Reserve President James Bullard’s 30%.”
The current level of the unemployment rate is 6.20%. All of the assessments on unemployment are based on the work of Charles H. Dow, co-founder of the Wall Street Journal and creator of the Dow Jones Indexes.
The Outlook
There are two probable scenarios to the current unemployment rate in the U.S., the first is a continuation of the rising trend from the 3.50% low established in January/February 2020 or a gradual decrease from the current level of 6.20%.
The continuation of the rising trend is generally assumed to be the course for unemployment. However, the history of unemployment data, whether accepted as accurate or not, is that it rises faster than it falls. After having risen to nearly 15% in the last year (an artificial advance according to Dow’s Theory), the prospects are that we should experience slight adjustments higher from the current level. However, the trend should be for a gradual decline to 4.90% unemployment rate before a re-assessment is necessary.
