Unemployment rate goes down, as do chances of a rate cut
but "animal spirits" are still negative
With the unemployment rate at 4.1 percent and the adaptation level at 4.02 percent, “animal spirits” are still slightly negative. The question now is whether the unemployment rate’s crossing above the adaptation level will signal an imminent recession as it has every other time in the past 70 years.
Or will World War jump-start a fiscal binge that will reverse the natural progression? We know that the consumer is on the ropes, so it would be cold comfort for them to see GDP increase on military spending.
My post below describes the theory, which was published on the summer solstice in 2022 (and featured on ZeroHedge.com). My theory was quoted in a front-page article in the Wall Street Journal in the 1990s (citation in the post below). Academic economics has ignored it for two reasons: it doesn’t involve fancy mathematics, and it works. Academic economics abhors any model that actually works.
If we subtract the adaptation level from the unemployment rate, we arrive at a confidence metric, which is slightly negative and likely heading down. Looking back at 2008, we see a similar upward jag in negative territory just before continuing its descent.
Stagflation!
Pray for peace!