Posted by: Ed Tittel
does employment history predice the employment future, economist's interpretation of unemployment decline, February 2010 employment situation
Sandy Leeds is a senior lecturer for the prestigious MBA program at the University of Texas. Even though he doesn’t have a PhD (he has all kinds of other degrees though, including a BA, an MBA, and a law degree) he’s an award winning faculty member nevertheless. Check out his blog which is called “Leeds on Finance.”
In his blog for today, he makes an interesting observation that has me thinking about — and maybe even rethinking — my own previous blog right here (entitled “Employment still going sideways“). First his observation, then my thoughts:
Unemployment has peaked? One economist said that we’ve never seen unemployment drop 0.4% and then go on and hit new highs. In other words, he argued that since unemployment has come down from 10.1% to 9.7%, unemployment has peaked. (Citation)
It’s inarguable that employment has come down just a teeny bit (0.4% is how much unemployment dropped from December 2009 to January 2010, and February held that same line more or less intact), but it’s also interesting to ponder the economist’s observation that Mr. Leeds cites in his own blog. I guess that means it’s not the size of the downward swing that’s so interesting about this decline, but rather, that following that kind of retrenchment, the unemployment situation has not swung back the other way as far as the historical record can tell us.
Ultimately, the assessment of this apparently paltry improvement depends on whether or not you believe that just because something has never happened before, it’s not going to happen this time around, either. On the one hand, with a depression and a half-dozen or more recessions to look back to and analyze, that’s an encouraging observation to make. On the other hand, these kinds of predictors might better be interpreted as “it’s highly unlikely that unemployment will increase again” rather than “ain’t gonna happen.”
Although this is more encouraging than I had thought when looking at the February numbers, I still don’t think it’s time to break out the champagne and the party hats. There are still too many people looking for work, or feeling stuck in their current jobs, for euphoria to kick in. And while we’re at it, I’d still like to see more tangible signs of improvement for the IT sector rather than “we’re not losing as many jobs as fast as we were in 2008/2009.” ‘Nuff said.