Turning Point in the Economy? Maybe

One of the most useful measures of the economy is initial claims for unemployment insurance.  Although the concept is somewhat narrow, it turns out that the correlation with other, broader series is very strong.  We get new data weekly, so we can see turning points in this data series sooner than we can catch the change in GDP or industrial production.

We may be just past the turning point.  Here are the data:

Like most everyone else, I use a four-week moving average to smooth out the wild weekly fluctuations.  The raw data (available here) show even more of a spike and subsequent drop-off.  The peak was in the last month of March.  However, here’s a warning.  The data have enough wiggles in them that I’m not positive we saw an overall peak, rather than a local peak, followed by a local trough, followed by a subsequent upward trend.  Every week that we stay below that peak, though, adds more hope that we’ll soon put the recession behind us.

Business planning implications:  Do your economic contingency planning for a turnaround in sales.  Are you ready to increase production, staff up, get more product from your vendors, and finance your working capital?  If you have not thought through all of these issues, get working on it.

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