A recent article in voxeu.org by Roger Farmer discusses recession dating between the stock market and unemployment rate. The model is very simple. The turn round in the stock market precedes the trough in the recession by approximately four months. The peak in unemployment growth is coincident with the trough in the business cycle.
Looking at the combination of thee two factors, Farmer suggests that the economy bottomed in May. Others have called the trough in July. W may say with some confidence that the recession has bottomed bu that is a far cry from saying we will have a robust recovery. The slow turn around in unemployment growth gives pause that this may be a jobless recovery.
Looking at the combination of thee two factors, Farmer suggests that the economy bottomed in May. Others have called the trough in July. W may say with some confidence that the recession has bottomed bu that is a far cry from saying we will have a robust recovery. The slow turn around in unemployment growth gives pause that this may be a jobless recovery.
Table 1. Recession dating and changes of direction in stock market
and unemployment growth
and unemployment growth
| Recession | Months that the trough in stock market growth precedes recession’s end | Months that the peak in unemployment growth precedes recession’s end |
| August 1929 – March 1933 | 9 | - |
| May 1937 – June 1938 | 3 | - |
| February 1945 – October 1945 | 3 | - |
| November 1948 – October 1949 | 4 | 0 |
| July 1953 – May 1954 | 5 | 0 |
| August 1957 – April 1958 | 4 | 0 |
| April 1960 – February 1961 | 4 | 0 |
| December 1969 – November 1970 | 6 | -1 |
| November 1973 – March 1975 | 5 | -2 |
| January 1980 – July 1980 | 2 | -1 |
| July 1981 – November 1982 | 5 | +4 |
| July 1990 – March 1991 | 5 | -3 |
| March 2001 – November 2001 | 2 | -1 |
| December 2007 – | - | - |
| Mean | 4.4 | -0.5 |
| Standard deviation | 1.8 | 1.9 |
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