This primary indicator just flashed a huge warning signal. Looking like its time to sell and take profits on the enormous post GFC rally. Note - keep a close watch on weekly claims in the coming weeks. We still want a little bit more confirmation of this rising before jumping to conclusions about the direction of unemployment, but I do not take this cross lightly.
Other Quick Notes...
Other Quick Notes...
- For this signal, there ARE some false positives, most notably around 1995. 1990's signal got the recession right on the dot, but the recession was mild and it wasn't necessarily a great signal on buying or shorting the markets directly.
- To get a better read on false positives combine this signal with others - look at it only post yield curve inversion. That alone will eliminate the few false positives.
- Keep an eye on other unemployment data series that are faster moving and not quite as subject to revisions. Challenger job cuts, ISM employment index, and a few others can help corroborate the story here.
- Other big jumps that were temporary false positives (see 2017 or 2005) typically occur due to things like hurricanes coming through. With that said, these were obvious temporary distortions, and not representative of permanent changes in the labor market.