Reminder: Employment is a Lagging Indicator

By at 18 June, 2020, 9:31 pm

by Raymond J. Keating-

The U.S. Department of Labor reported on June 18 that seasonally-adjusted initial jobless claims registered 1.5 million for the week ending June 13.

That’s down slightly from a week earlier, but well below the far higher levels registered over the previous three months. Of course, the most recent data remain far above the norm, for example, during the same week last year, initial unemployment claims stood at 219,000. (See the following chart.)

Source: Federal Reserve Bank of St. Louis, FRED

As we consider the question of whether or not a recovery already is under way, it must be kept in mind that employment is a lagging indicator, often by a few quarters. So, as the economy starts to grow, employment will still get worse for a period of time, and on the flip side, when the economy slows, employment can stay strong a few quarters.

The hope remains, therefore, that the economy bottomed in April – though the second-quarter GDP number promises to be grim – and the process of clawing back is moving forward.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.



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