This is Not Your Father's Recession

I like using housing starts as a 6-18 month predictor of the economy.

Why?

Housing starts predict unemployment by 6-18 months quite well. Housing starts will tank, and sure enough 6-18 months later unemployment starts to tank. Housing market bottoms out and starts to recover, unemployment sure enough peaks 6-18 months later.

But what if housing starts stay stubbornly low?

Notice in the chart housing starts usually recover immediately, bottoming out and immediately recovering resulting in a very V shape recovery. However, (despite all the stimulus money and low interest rates and first time home buyer credits) housing starts remain stubbornly low this time around, matter of fact, staying quite low and flat for pushing three years;



So, my fine fellow economists, what do you suppose this means for unemployment?

I know the answer is simple, but keep in mind those brilliant economic geniuses at the Fed and Obama's economic team can't figure this out. Which makes you essentially all tippy top super official professional economists!