The unemployment rate is arguably one of the most closely watched metrics out there. So, it’s about time we finally gave it a look:
The first thing that is immediately obvious to me when looking at this chart is the direct relationship between the unemployment rate and recessions. In every single recession, the unemployment rate went up.
And, if we look at the right of the chart and assess the latest data just released, what do we see? The beginning of a spike up. This is why everyone is saying we are already in a recession.
Although the economists at the NBER haven’t officially announced anything yet and may not for some time, it is obvious to almost anyone who takes a moment to look around that we have entered a recession. Economic data is slow to reflect the speed of the outbreak’s impact.
As for how long that recession will be, that is difficult to predict. Based on the history seen in the chart, we can see that recessions basically end once the unemployment rate starts falling.
Unfortunately, just because a recession is technically over doesn’t mean times aren’t difficult. It will take awhile for the unemployment rate to fall to pre-recession levels. We have a tough road ahead of us but, just like they always have, things will recover and a new expansion will begin!