The September report from the Bureau of Labor Statistics showed that the unemployment rate was 9.1 percent, the same number seen in August.
In 2011, the average unemployment rate has been mostly unchanged. It has varied from a low of 8.8 percent to as high as 9.2 percent, a relatively narrow range for this volatile economic indicator.
During that time, the economy has slowed and many now forecast that a recession is inevitable. This latest unemployment report doesn’t seem to offer any insight into economic growth.
The data might help understand the recent action in the stock market.
When it comes to predicting the stock market, the unemployment rate is a lagging economic indicator and generally confirms the trend.
Hiring comes after the economic bottom and layoffs follow the peak.
These decisions, and therefore the unemployment rate, reflect where we are in the business cycle. We are in a steady economy without dramatic growth and we seem unlikely to see a steep decline.
Stock investors in theory look at the future and usually try to move ahead of the economic trend. Stock price trends tend to lead the economy, peaking before recession and bottoming before the recovery.
After a sharp selloff in the summer, stock prices traced out a broad, but exciting, bottom. Large daily moves both up and down have failed to establish a trend in either direction over the past three months.
With unemployment holding steady, it is likely the economy will remain stagnant and stocks may finally have established a bottom.
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