Warnings We’ll Wish We’d Heeded, Part One – Plunging Jobless Claims

Jon Banking, Blogosphere, Economy, Fiscal Policies, Market Commentary

It’s the same story every time: Imbalances build up during a recovery but most investors ignore them because good times have become the new normal and the uptrend seems bullet-proof. Then things fall apart and everyone wishes they’d paid attention to history.
This series will cover a few of the more glaring examples of late-cycle myopia, beginning with jobless claims, i.e., the number of people joining the ranks of the unemployed.
In hard times when layoffs are widespread and new jobs scarce, this number spikes. In better times, when jobs are plentiful and employers are desperate to keep good people, the number falls.
But when it falls past a certain point wages start rising at a rate that leads (through market forces and/or Federal Reserve actions) to rising inflation and higher interest rates, which are destabilizing and generally cause a recession.

This post was published at DollarCollapse on DECEMBER 19, 2016.