Recession in U.S. May End in June, Claims Signal: Chart of Day By Carlos Torres
May 6 (Bloomberg) -- A peak in the number of jobless claims signals the worst U.S. recession in half a century may end in June, according to Thomas Lam, an economist at United Overseas Bank Ltd. in Singapore. As the CHART OF THE DAY illustrates, the previous three recessions all ended within weeks after the number of applications for unemployment benefits started to wane. In his calculations, Lam smoothes the weekly claims figures using a proprietary weighted-average formula that more closely correlates with economic turning points. The graph shows the smoothed figures reached a high of 664,000 in the week ended April 4 (blue circle), indicating the economic slump will probably end by next month (dashed blue vertical line), he said. With 95 percent confidence, the model signals the recession will be over at the latest by the end of September, he said. One shortcoming is "the pace of recovery, whether it's mild or vigorous, is not clear from this analysis," Lam said in an interview. "My best estimate is that it's going to be a really tepid recovery." Lam projects the world's largest economy will expand just 2 percent in 2010, about the same as the 1.6 percent pace of growth in 2002 following the previous recession. Other caveats include the assumption that claims don't turn higher again or that labor-market conditions haven't changed markedly from prior recessions, Lam said.
