The Rear View Peak

In classic partisan style, political pundits are now debating whether or not the unemployment rate is a lagging indicator. Many politicians don’t do math. That’s why this is only a political debate. The peak unemployment rate is now in the rear view.

October’s 10.2% unemployment rate will be looked back on as just that, the peak for this part of the cycle. While this morning’s 10% rate was in line with November’s reported unemployment rate, the probability in our macro model continues to climb that we will be seeing a 9% rate in the coming months.

As our new Financials Sector Head, Josh Steiner, wrote in a note earlier this week titled, “Census Hiring An Added Credit Tailwind for 2010”:

The US Census bureau has begun hiring for the upcoming decennial census. Hiring in earnest will begin in March/April once it is known how many people will be needed to conduct the census. For those unfamiliar, the census survey is mailed out to every household in America, and census workers are needed to canvas those homes in which the census is not mailed back. So, from a hiring standpoint, it would be best if no one completed the mail-in version of the census. Census worker pay is $15-18 an hour if any readers are interested in moonlighting.

In the last census in 2000, the mail-in response rate was 67% and the census department is hoping for a comparable result this time around. This 67% response rate led to the hiring of 530k workers - or close to half Wal-Mart’s US workforce. The response rate in 1990 was 65%, roughly the same, and there were 335k workers hired for the job. This time around the expectation is that 1.2 million people will need to be hired to conduct the census, according to the head of census recruiting. With a number that large, expect census hiring to begin to generate a perceptible hiring tailwind this Spring and run through the summer.

If you are on the side of the bet that the unemployment rate is setting up to make higher-highs from here, that’s what makes a market. Both the bond market and stock market are telling you that the Depressionista bet remains the wrong bet.

Tops are processes, not points. However lagging this economic reality may be, it is far easier for me to see the peak point for America’s unemployment rate in the rear-view today than it was yesterday.

KM

Keith R. McCullough
Chief Executive Officer

The Rear View Peak - unemplo