Figure 11-6: The unemployment rate’s lagging relationship to real consumer spending (PCE)
The unemployment rate (green line), shown inverted here (see right scale), typically reaches its most favorable (lowest/inverted) level a year or more after the peak in year-over-year consumer-spending growth (black line). It reaches its most alarming (highest/inverted) levels well after consumer-spending growth has reached its trough and has begun to recover.
Current Comment: The unemployment rate (green line)—a lagging indicator—has continued to decline (remember: inverted right-hand scale) as year-over-year growth in real consumer spending has continued at 2%-4%. The favorable unemployment numbers, though, are more the result, than the cause, of stable growth in the economy, driven by consumer spending. However, with real average hourly wage growth likely to continue supporting consumer spending, the outlook for unemployment appears generally favorable.
