US Unemployment: A Reason to be Optimistic — International , US employment — GCC Market Analytics
US Unemployment: A Reason to be Optimistic | GCC Market Analytics

Wednesday, 22 December 2010

US Unemployment: A Reason to be Optimistic

Any improvement in the global economic situation will almost certainly correspond with an improvement in the economic conditions in the US.  The US is still the biggest economy in the world and the eyes of all other countries, including the Gulf region, will be watching for signs of a turnaround in the American economy.

And there's little chance of any meaningful or sustained recovery in the US without a significant improvement in two areas: employment and housing. 

Well, I came across some interesting charts on Don Fishback's blog that hint at better times ahead for US employment. 

The first chart below shows the US employment rate (blue line) along with NFIB "Poor Sales" (red line).  As you can see the two series are highly correlated. Members of the NFIB are made up of small businesses. In the past, when there has been a high number of NFIB members that have rated their sales as "poor" this has tended to correspond with high unemployment periods. Conversely, low unemployment periods have tended to correspond with a low number of NFIB members that rated their sales as poor.

In short, unemployment in the US is closely correlated to the level of small business sales. Makes sense.

At present the level of unemployment and number of small businesses rating their sales as "poor" are both at historically high levels.  However, recently the NFIB "Poor Sales" level has begun to fall from the highs set about a year ago. 

The next chart below shows the NFIB Optimism Index which is a measure of small business sentiment in the US.  Although still low in a historical sense the level of small business optimism has risen significantly since the 2009 bottom and has just posted its fourth consecutive monthly gain.

What do the two charts above mean for US unemployment: Here Don Fishback:
Here’s the bottom line.  If small businesses are optimistic for a reason … if sales really are starting to pick up and become less poor … then we might actually see improvement in the unemployment rate.
And if the unemployment rate does fall that's a big win for the US economy and the rest of the world.