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something You Probably Didn't Know

The main blerb that caught my eye was this...

"Here's another important reminder about the unemployment rate: It is one of the most lagging of all economic indicators, so heed the warning about focusing on it when assessing where the economy is in a cycle. As we often explain, a rising/high unemployment rate doesn't bring on recessions…recessions eventually cause the unemployment rate to rise. You can clearly see that above around the gray-shaded recession bars. It also works on the "back end" of a cycle: A falling unemployment rate doesn't bring on recoveries…recoveries eventually allow the unemployment rate to fall."

So why is the Fed holding off rate cuts based on this, if its not a leading indicator. And clearly looking at the charts provided in this article, supports this.

So what does this mean? If the Fed is using this as an excuse to hold rates higher for longer, until inflation actually hits 2%, then they will have waited too long. As we all know, rates and the economy is like a Pedulum, and you don't just stop it like pulling the brakes on a train. Its more like trying to stop the Titanic. Once you put on the brakes you have to wait for them to have an effect, and the bigger the ship, the longer it takes to stop and reverse course. And like the Penulum if nothing is done until the bottom hits, it will just keep moving possibley into negative territory, and then we have real problems. Companies stop making money... people lose jobs, really lose jobs... and the forclosures start to pile up...

Doom and Gloom... hey, have a great day.

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