No doubt there are several reasons why headlines often state what they do, but one of them must be to grab a potential reader’s attention. I receive pushes from several major news sources, and one crossed my desk on July 24 that really caught my attention. It simply stated, “A stalled recovery,” and it went on to state that the “mini-recovery seems to have ended” and that there were multiple economic indicators in support of that statement. As a matter of record, this news push (not the complete article) only stated one reason, and that reason was that claims for unemployment benefits had flatlined in recent weeks.
Going from a flattening in new claims for unemployment to the end of the nascent recovery is quite a leap. Economic trends rarely move in straight lines, whether the trend is heading up or down. It is not at all unusual for an economic indicator to pause or even temporarily reverse direction within the context of a larger trend, which means a pause in the decline in new claims means nothing other than there was a pause in the decline in new claims. It is much too early to speculate that the pause in the decline in new claims means that the recovery is over.
It is also important to note that it is not at all unusual for the number of unemployed people to go up in July. The number of people unemployed in July has gone up 8 out of the last 10 years, with an average increase of 1.54% from June. Stability in July seems like it might be a good thing rather than signaling the end of the recovery.
Our forecast calls for GDP to move up slightly in the third quarter of 2020. We will closely monitor our dashboard of leading indicators for July to see if they stay green and therefore indicative of ongoing recovery. Subscribers will be the first to know the results through our onDemand portal, which is updated as the data comes in. Others will find out afterward through subsequent blogs and TrendsTalk. For now, the leading indicators are signaling more recovery, and we encourage readers to track the trends and to beware of the headlines.