We Never Left 'The Great Recession'

NEW YORK ( TheStreet) -- Nonfarm payrolls increased by a less-than-expected 115,000 in April, but with upward revisions for February and March the net was a gain close to the 175,000 consensus.

The labor force shrunk by 522,000 bringing the unemployment rate down to 8.1%. This forced the labor-force participation rate down to just 63.6% from 63.8% in March. This type of release questions the time-stamping of "The Great Recession."

When the National Bureau of Economic Research marked the beginning of "The Great Recession" in December 2007, the unemployment rate was just 5.0%. The NBER waited until Dec. 1, 2008 to make this recession call.

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When the NBER called the end of the recession in June 2009, the unemployment rate was 9.5%. The NBER waited until Sept. 20, 2010 to make the call that the recession is over. So the U.S. came out of recession with a 9.5% unemployment rate after entering recession with a rate at 5.0%. This has always made no sense to me.


Unemployment Rate 2002-2012

From the Bureau of Labor Statistics

Look at the trend in the unemployment rate and you can see why you could say that the recession that began at the end of 2007 has not ended yet. Clearly, we need to see a trend below an unemployment rate of 6% to say that a jobs recession is over.

Unemployment Rate Each January 2002-2012

From the Bureau of Labor Statistics

Misconceptions about Weekly Jobless Claims

Most Wall Street economists and folks on financial TV say that it is positive for the labor market with jobless claims under 400,000 for 15 consecutive weeks. I have disagreed with this perception for the past 10 years since Delos Smith, the former chief economist at the Conference Board taught me that initial jobless claims have to trend below 350,000 to end a jobs recession.

Looking back to 2007, the first week above 350,000 was the week of Nov. 10, 2007, thus the December 2007 time stamp for the beginning of "The Great Recession" was appropriate. The peak in claims was 965,791 for the week of Jan. 10, 2009. The NBER said that the recession ended in June 2009 when initial jobless claims were 563,387. Using the NBER to make these calls has proven to be a mistake in the new millennium.

I call weekly readings above 350,000 as the recessionary threshold. My call remains that the Jobs Recession continues, and we need a trend of 15 weeks below 350,000 before calling an end to "The Great Recession."

Signals From Major Equities

Today's closes for the major equity averages should provide a key to volatility for the remainder of the second quarter.
  1. The Dow Industrials is between my quarterly value level at 12,794 and my monthly risky level at 13,354 with this week's pivot at 13,210.
  2. The S&P 500 is below my monthly pivot at 1397.0 with my annual value level at 1363.2, and weekly risky level at 1415.8.
  3. The Nasdaq is below my monthly pivot at 3041 with my quarterly value level at 2911 and weekly risky level at 3120.
  4. Dow Transports is below my monthly risky level at 5386, and well below its July 7, 2011 all time high at 5627.85.
  5. The Russell 2000 is below my monthly pivot at 813.56 with the all time high of 868.57.

Conclusion: A weekly close for the S&P 500 below my annual value level at 1363.2 signals that "Sell In May" in 2012 should work as well as it did in 2011.