Saturday, March 1, 2014

Once Again, This Is Not 1982

The following chart shows the approximate odds (given current conditions) that a nonfarm payroll employee chosen at random can go an entire year without filing for unemployment.

Click to enlarge.

I have good news, bad news, worse news, and worst news.

First, the good news. There have been only two periods since 1967 when the odds of not being laid off were similar to what they are right now. At today's 88%, we're just shy of the all-time record.

Now the bad news. The first similar period was heading into the recent dotcom bust. The second similar period was heading into the recent housing bust. This should probably not inspire confidence.

Next comes the worse news. If a given household has two people working, then the odds of both people avoiding the unemployment lines for an entire year falls to just 77% (0.88^2). That's assuming that the layoff odds can remain so favorable from here. Further, a household relying on two stable incomes in order to make the mortgage payments is more likely to default on a mortgage payment than a household relying on just one stable income (NAR's ridiculous "Housing Affordability" Index notwithstanding). The house is in jeopardy if either worker loses a job.

And lastly, here's the worst news. Current conditions are not even remotely similar to 1982. 1982 was arguably the best time in American history to invest in the stock market for the long-term. Things just kept getting better and better for nearly two decades. Once we reached the "as good as it gets" phase in 2000 and again in 2007 though, there just wasn't a whole lot of upside left. Well, it is now 2014. Another 7 years have elapsed. We're pretty much back to "as good as it gets" yet again. I seriously doubt the next "unexpected" surprise will be to the upside.

Let's add the S&P 500 index adjusted for inflation to the chart (right scale in blue) to drive this worst news home.

Click to enlarge.

As seen in the chart, this is clearly not 1982. It is looking a lot like 2000 and 2007 though, so we've got that going for us, which is nice. Sigh.

This is not investment advice.

See Also:
This Is Not 1982

Source Data:
St. Louis Fed: Custom Chart #1
St. Louis Fed: Custom Chart #2


dearieme said...

Cheer up: you've got a President who is more likely to spend time on his golf than in planning to send troops to the Ukraine.

Rob Dawg said...

Good thing the 2014 biotech bubble is nothing like the 2000 tech bubble. Heck they don't even have the exact same name never mind sky high p/e ratios or nothin'.

Troy said...

made that for DeLong's.

blue is wages
red is consumer debt
green is federal debt

♪want a new drug

Stagflationary Mark said...


"Where is the profit in sending troops to the Ukraine?" - Anonymous Ferengi Leader

Stagflationary Mark said...

Rob Dawg,

Good thing!

I just want to point out that I spend all my time these days clicking on pop up ads. Just doing my part to generate ad revenue for someone. It adds to GDP! Win, win!

Click, click, click, click, click, click, click!

Heck, someday I might even follow it up with an actual purchase! (Don't hold your breath, lol.)

(Gallows humor.)

Stagflationary Mark said...


want a new drug

If the economy wishes to sleep, that's just too bad.

Coffee -> Red Bull -> Nodoz -> Speed -> Cocaine -> ZIRP

It's bound to work long-term!

Troy said...

I see the third wave, on the horizon

and it's a doozy!

Stagflationary Mark said...


And none of it can save our shopping malls. Sigh.