Things to watch for in 2011
As the U.S. economy moves out of the Great Recession there are a few key indicators that small businesses and entrepreneurs should watch for as they serve as sign posts for the recovery. As these milestones are reached the speed, breadth and depth of the recovery will increase significantly to the point where businesses will ?feel? the tailwind. The key indicators are outlined as follows:
New Claims for Unemployment - 4 Week Moving Average
Ignore the weekly number released at 5:30am every Thursday as it is too sensitive to all sorts of influences (e.g., weather, holidays, individual State worker furloughs) to be of any value. This number is the only weekly economic indicator produced by the Federal Government and is a reasonable indicator of the degree to which the bucket is still leaking jobs due to layoffs. The 4 week moving average smoothes out the weekly variations and provides a very good look into the U.S. labor market.
Given the number of people in the U.S., the number of potential workers out of the total population and the number interested in working vs. remaining on some combination of public assistance (worker's compensation can continue for up to 99 weeks given the combination of State and Federal programs and since it based on what the person made while employed can be equal to or greater than what was available at the depths of the Recession) the approximate number of potential workers is about 150 million. At 10% unemployment that means 15 million are out of work but 135 million are still employed.
The threshold number for the 4 week moving average of New Claims for Unemployment is about 375,000. As the moving average trends below that number the people leaking out of the bucket will be more than offset by the number of new jobs created. The bad news is that this key indicator has been above 375,000 for almost 3 years (June 2008) but as of last week was at 382,000 and trending down.
One or two weeks of claims below the 375,000 mark will put the 4 week moving average clearly in the job creation zone. One can already feel the improvement through anecdotal stories from people about finding new positions with one interview, obtaining a raising from the new position and current employers responding with raises and improved benefits. The employment picture will help most companies sell more of their products and services but it will impact their personnel costs as well.
Watch the Thursday morning report to see when the moving average drops below 375,000. My prediction is that it will be much sooner, maybe in a month or two, than the experts are expecting.
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