Monday, September 08, 2008

Unemployment Lags Stock Market Returns

A picture is worth a thousand words and the below chart fits that mantra. As Argus Research notes in the chart, courtesy of Charles Schwab & Co. (SCHW), the unemployment rate is often referred to as a lagging economic indicator. As such, it tends to peak after the market has already begun to recover.

(click on chart for larger image)

unemployment rate and S&P 500 Index chart as of September 2008The Fannie/Freddie bailout may be the event that puts a bottom into this market.


Unemployment & Stock Returns ($)
Market Watch-Argus Research
September 8, 2008

1 comment :

Basil said...

Okay, I see the correlation starting in about 95, as S&P returns go positive, unemployment goes down, then unemployment rises in 01 as returns go negative, then switch again in 04 and 08. What's happening with the unemployment peak in 92-93? That correlates to positive S&P returns? Does that peak correlate to the brief negative returns in 90-91?