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15% unemployment next year?
Unemployment is a lagging indicator on the health of the economy. Productivity rises when layoffs occur, which leads to bigger profits and investments, which leads the way out of a recession.

Right?

But this time around, unemployment is a leafding indicator. It started dropping in December 2007, six months before the recession began in the third quarter of 2008. It last four quarters (or one year).

Unemployment seems to have leveled off. But might it rise sharply again next year?

In July, Louis Woodhill wrote that 14% unemployment is possible next year based on federal statistics on private investment. Woodhill is an engineer and software entrepreneur, and is on the Leadership Council of the conservative Club for Growth.

He cited a 38% drop in "real nonresidential fixed investment," which he defined as private business investment -- PBI -- in the first quarter. This followed a 22% drop in the fourth quarter of 2008.

"The unemployment rate a year ago was 5.5%. Because the potential labor force is growing, we need employment to increase by 1% annually to keep the unemployment rate from going up. The 37.9% investment decline reported by the BEA can be expected to eventually produce a reduction in total employment of about 8.5%. Accordingly, we can expect unemployment to rise to about 14% within a year unless the downward slide of PBI is reversed," Woodhill wrote.

So how did "real nonresidential fixed investment" do in the second quarter (April through June) and the third quarter (July through September)?

Not well.

From the government: "Real nonresidential fixed investment decreased 2.5 percent in the third quarter, compared with a decrease of 9.6 percent in the second. Nonresidential structures decreased 9.0 percent, compared with a decrease of 17.3 percent. Equipment and software increased 1.1 percent, in contrast to a decrease of 4.9 percent. Real residential fixed investment increased 23.4 percent, in contrast to a decrease of 23.3 percent."

Looks like that 14% may become 15%. We shall see.
Posted by: Fred 2009-11-06
http://www.rantburg.com/poparticle.php?ID=282623