11:45 AM
I Hope I’m Wrong About Rising Unemployment Statistics
Being wrong is not something people strive for in daily life. Usually, being wrong is a bad thing. It hurts one's reputation, wallet or worse. Journalists -- often purveyors of negative news ("If it bleeds, it leads") -- for the most part, strive to be accurate with their reporting. Even when a story focuses on a negative topic, journalists take pride in being factually correct. That's what makes a good journalist. But for the first time in my career, I genuinely hope that a recent prediction in one of WS&T's blogs turns out to be totally and completely wrong.
Despite my hopes, however, the dispassionate cold facts are lining up against me. In late May, I posted a blog entry based on analysis of data from University of San Francisco business professor Jon Fisher. The data points to the national unemployment rate reaching 9 percent within the next year. Fisher's analysis contends that as the number of new housing starts drops, historically, the unemployment rate rises within the next 12 months. Well, since mid-2007 the number of housing starts has been dropping like a stone. A week after I posted my blog, the unemployment rate jumped to 5.5 percent, its highest level since October 2004. Oil prices continue to soar, with Goldman Sachs predicting oil will reach $200 a barrel within a few years if there is a supply disruption. I hope Goldman is wrong, too.
When the conversation at a BBQ this weekend shifted from the heat wave, Big Brown and the woeful Mets to the economy, I mentioned Fisher's 9 percent unemployment prediction to a banker friend. "Those are European unemployment numbers," he cracked. But then he quickly looked serious and asked, "But do you think it could go that high?" I mentioned Fisher's research and the patterns in the data that show a correlation between housing-start drops and increases in unemployment in 1968, 1974, 1978, 1981 and 1985. Gulp. Conversation quickly turned back to baseball.
Wall Street firms continue to cut jobs by the thousands. To date, financial firms have laid off more than 83,000 people. New York City alone will lose more than 33,000 jobs, according to the mayor's office. Most expect more will follow.
To paraphrase one of my colleagues, "I would never wish that anyone would lose their livelihood; even the most incompetent people have families and mortgages to pay." I agree. But while most people try to ignore excessively negative economic data, the negative economic data is becoming too much to ignore. Still, I really hope the prediction is wrong.
Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio