The unemployment report for July was a bit of a surprise, as the jobless rate dropped a fraction instead of rising, as most economists expected. The news cheered investors last week and gave many of us a new ray of hope about an economic recovery.
But this week had new reports (slumping retail sales, a jump in foreclosures and first-time unemployment claims) that made the outlook cloudy once again.
“It’s going to be a recovery that only a statistician can love,” as Wells Fargo senior economist Mark Vitner said recently.
Nonetheless I am intrigued by Nate Silver’s analysis (at fivethirtyeight.com) of July’s jobless report. He basically uses the month’s data to argue why the unemployment rate WILL NOT go to 10%, as most economists predict.
Here’s a graph that outlines his projection, based on the difference between June and July jobless data.
The model is relatively simple, and Silver rightly cautions that none of us should put too much stock in economic forecast models. And he may have to thank all the long-term unemployed folks who’ve stopped looking for work — their departure contributed to July’s decrease to 9.4%.
Silver basically predicts that the recession doesn’t have enough gas to get us to 10% unemployment. Cross your fingers. All we can do is wait and watch.
