Unemployment as a Lagging Indicator - A Mistake

The continuing (mis)perception of unemployment rates as a lagging indicator persists among economists.  By treating it as such, they continue to pervert the already "dismal science".

In a 70 percent consumer driven economy it is ludicrous not to assign unemployment as a forward looking indicator.  DOES IT NOT OCCUR TO ECONOMISTS THAT SPENDING PRACTICES AND BEHAVIOR GOING FORWARD WILL BE IMPACTED BY NEW OR CONTINUING UNEMPLOYMENT.  Let me repeat that, families or individuals without jobs just cannot continue their former spending habits.  For the economist asleep in the back row - the rate of unemployment and new claims filed will to a great extent determine the direction of a 70 percent consumer driven economy IN THE FUTURE.

With new claims remaining well above 400k a week (and in my estimation soon to increase with local, state and federal budget cutting layoffs yet to hit) and those already unemployed facing minimal new job creation as confirmed by the June pathetic 18k addition to payrolls - the forthcoming direction of the economy should be quite clear.

Consumer spending will dive and small retail businesses will in turn be shuttered.  Restaurants will close, foreclosures will rise, the typical homeowner will continue to see their main asset deteriorate in value.  Large businesses will continue to hoard cash and layoff workers to address decreasing demand.

Our government has completely failed us by shoveling trillions to the financial industry through TARP, emergency loans, the discount window, QE2, bailouts of AIG-type monstrosities, foreign banks and the financial arms of multi-national corporations.  NONE of this has filtered down to the normal citizenry.  NONE of this spending has helped the average American citizen.  Trickle down economics has been exposed as a dangerous hoax - a thoroughly discredited fallacy.

Instead, the President's commission on jobs features Jeffrey Inmelt - the prototypical shredder of jobs.  This person - surrounded by similar thinking types, defective economists and financial "stalwarts"  - will not formulate anything of true value.  Just read their preliminary report and see if you can detect any inspirational feature whatsoever.  It is a rehash of nothingness - a travesty of wasted dollars of wining and dining.

When one properly focuses on unemployment trends as a FUTURE INDICATOR, it becomes clear that our future will be in a downtrend as our government chose to indiscriminantly fund those who will not contribute to a true recovery, while defunding those who could (government support agencies).  This to occur at the same time as more of our citizens will turn to the defunded parties to help them survive a crisis to which they did not contribute.  The "oh so important" FUTURE INDICATOR is signalling very lean times coming up.  But we discount it at our peril by failing to properly account for it - instead consigning it to the utterly wrong status of lagging indicator.