Chart below show US Unemployment Rate for past 70 yrs.

Two parties involved – The Powers That Be (TPTB) and the eligible age US worker, we’ll call them STIFF’s – as in the working (or wish they were) type.

Demarcation Lines – For aurgument’s sake let’s call anything below 5% the Happiness Zone – TPTB and the STIFF’s are in harmony or at least not as concerned with one anothers’ business.

Shaded areas are apparent recessions (in hindsight).

The troughs are considered full or at least ‘acceptable’ employment, nearly all of which are in The Zone.

The uptrends are sharp and they nearly all have the same slope.

Downtrends while understandably not as steep, represent optimism/hope and rising confidence of the STIFF’s that TPTB are working toward their best interest.   Failure to ameliorate this hope results in regime change and discomfort for TPTB – like anyone else, self interest is their bottom line.

Yea, nothing new here but I’m a 5th grader.

So here’s what I see as the most predictive thing about this chart – note the widening wedge patterns in the STIFF’s vs. TPTB cycles – 1950-1960 (3 ct) 1970-1980 (3 ct) and most recently 2000-Current (2 ct) – very symetrical.  Then notice the downward slope behavior and duration of ‘peak employment’ at the bottom of the troughs – on a month-to-month basis (google macrotrends for interactive chart), they are somewhat rounded, lie in a tight % range, and only last anywhere from 12-24 months (once 36 months in the late 60’s).

It makes sense to me that the cycles come in higher-lows and higher-highs since the first attempt at ‘fixing’ whatever problem may be at hand (inflation, stagflation, tech bubble burst, debt crisis etc) turns out not to be an entirely sucessful, but one that gets the economy through the next election cycle or two.

The one striking thing is THE TROUGHS DON’T LAST – the battle between TPTB and the STIFF’s is as cyclical today as it was 70 yrs ago – sure as winter comes.

Ok, so now look at where we are (or have been) in the past 14 months – the slope has CHANGED, we are below 5% unemployment (for the most part STIFF’s are happy or oblivious).  Note also how this is what might be (likely in my view) the bottom of wave 3, however this time the peak will not be 10%, but much higher – again symetry is the most likely outcome.

Finally the forecast – 2 scenario’s on slightly different time scales.

1) 4.6% is the final trough in the current cycle – not likely to go below that IMO for two reasons – slope change has already occurred 14 months ago and is in roughly in line with 1999 and 2007 ‘peak’ employment rates. – The forecast, again assuming symetry, we are now nearly 2 months past peak employment and within the next 6-12 months another recession will have begun and unemployment will spike on its way to well beyond 11% if the 3 cycle trend holds  –  this could get scary quick.

2) we may in fact revisit 4.6%, maybe a one month spike lower which would extend the next recession and unemployment spike cycle into early-mid 2018.

I do not see how the US will make it to 2019 and beyond without a MAJOR recession and double digit unemployment which is entirely reasonable given we’re at near ZIRP (Fed out of ammo) and most households are back to 2007 debt loads.

What does this have to do with PM’s – I don’t want to be holding paper when the next wave of ‘solutions’ arrive.