The persistently high unemployment rate is seen these days as the key bellwether of the sluggishness of the economic recovery. The latest data on the jobless rate was the weekly new claims for unemployment insurance released on July 22, which found a slight increase both from the prior week’s claims on a seasonally adjusted basis, and on the four-week moving average. Specifically, the Labor Department reported that initial claims for the week ended July 17 was 464,000, an increase of 37,000 from the previous week’s revised figure; the four-week moving average was 456,000, an increase of 1,250 from the previous week’s revised average of 454,750.
But as for how you should use those numbers in investing, Craig Callahan, the founder and president of Icon Advisers, says “unemployment data has never been useful for investing.”
In Icon’s latest Market Moves Outlook report, Callahan discloses the results of research he’s done on the last recession that sported double-digit unemployment, in 1982, and compared it with the 2008-2009 recession to see how the stock markets performed coming out of those recessions. The Outlook report notes that despite a much higher unemployment rate going into the recession, and despite unemployment remaining high for years after the August 12, 1982 low, the S&P 500 index posted returns of 63.8% in the year following the low, up to a 282.2% increase in the five years following the low.