Wednesday, April 08, 2009
This is a follow-up to yesterday's piece A sucker rally or a new bull market? in which it was suggested that stock market bottoms occur around the time that job losses peak. The table below fills in some of the details behind that statement.
Remarkably, going back to 1945, stock market bottoms, on average, occur almost exactly when job losses peak, within three days as shown above. Further, if you remove the 1960-1962 outlier where stocks didn't reach their lows until two years after the job market did, stock market bottoms lead the most extreme job losses by about three months, on average.
Interestingly, as a percent of the work force, the recent three consecutive months of 0.5% nonfarm payrolls declines don't look all that severe compared to recessions prior to 1990.