Will Unemployment Spike In 2024? History Of Fed Rate Cuts Would Suggest So

The last set of jobs data showed the unemployment rate fell to 3.7% in November, while the Fed said on Wednesday it didn’t expect the jobless rate to rise higher than 4.1%. But historical data suggested around 7.5% of Americans could be without work within the next couple of years.

The sobering data from Reventure Consulting showed that since 1950, shortly after the Federal Reserve made its first rate cut the rate, of unemployment spikes.

Historically speaking, the first rate cut comes three months before the unemployment rate starts to rise and, on average, the jobless rate rises to around 7.5% during a Fed easing cycle,” a post on the The Kobeissi Letter X account said.

This is incredible:Just about every time the Fed started CUTTING rates dating back to 1950, the unemployment rate has spiked.Historically speaking, the first cut comes 3 months BEFORE the unemployment rate begins to spike, according to Reventure.On average, the unemployment… pic.twitter.com/DChSRJJdD7

— The Kobeissi Letter (@KobeissiLetter) December 14, 2023

Also Read: UAW’s Return To Work Pushes US Jobs Growth Higher, But Dark Clouds Hover Over Retail Sector

Official Jobs Data

The latest official data release came on Thursday, with weekly initial jobless claims dipping to 202,000 from the previous week’s 221,000. The more telling numbers, however, are in the continuing claims, which have trended higher since September.

“The rising trend in continuing claims suggests that people are finding it harder to obtain a new position,” said Ian Shepherdson at Pantheon Macroeconomics. “That’s reflected in the deterioration in the ‘jobs plentiful’ and ‘jobs hard to get’ readings in the Conference Board consumer confidence survey.”

Recent monthly purchasing manager surveys have also reflected falling headcounts. The November manufacturing purchasing manager index (PMI) eased to 49.4, indicating economic activity in the sector was falling.

The iShares U.S. Industrials ETF (NYSE:IYJ) which tracks companies in the U.S. manufacturing sector, was up 1.1% in early trade.

This month’s non-farm payrolls report showed just 28,000 jobs added to the manufacturing sector in November, and this was flattered by 30,000 Union of Auto Workers members returning to work after a strike. That suggests a net 2,000 lost…