Why does anyone pay any attention to the unemployment rate? If it's not clear by now it's a meaningless number, then a soon-to-be published white paper will put the issue to bed. I bumped into this ditty because I know the researcher and, as someone who speaks frequently on the subject of educating 401k investors, I was looking for some interesting economic data. (To see how this is all tied together, you might want to read "Employment Statistics, Fiduciary Duty and 401k Investor Angst," FiduciaryNews.com, April 8, 2014.)
The white paper, tentatively titled "What Employment Data Tells Us About the Economy," begins with the idea that the unemployment rate is correlated to our economy, as measured by GDP. Assuming that's the case, the dramatic drop in the unemployment rate might explain the equally dramatic rise in the markets last year. Should this be the case, it would quiet all the skeptics who insist there's a disconnect between the market and the fundamentals of the economy.
Unfortunately for those of bullish tendencies, the white paper shows how a simple correlation test lead one to conclude the unemployment rate is not a good proxy for GDP. The correlation is quite low (less than 31%). I can hear the collective sigh as the optimistic hope escapes from your soul.
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Christopher Carosa
Chris Carosa has been writing a weekly article and monthly column for BenefitsPRO online and BenefitsPRO Magazine since 2011 and is a nationally recognized award-winning writer, researcher and speaker. He’s written seven books, including From Cradle to Retire: The Child IRA; Hey! What’s My Number? – How to Increase the Odds You Will Retire in Comfort; A Pizza The Action: Everything I Ever Learned About Business I Learned By Working in a Pizza Stand at the Erie County Fair; and the widely acclaimed 401(k) Fiduciary Solutions. Carosa is also Chief Contributing Editor of the authoritative trade journal FiduciaryNews.com and publisher of the Mendon-Honeoye Falls-Lima Sentinel, a weekly community newspaper he founded in 1989. Currently serving as President of the National Society of Newspaper Columnists and with more than 1,000 articles published in various publications, he appears regularly in the national media. A “parallel” entrepreneur, he actively runs a handful of businesses, including a small boutique investment adviser, providing hands-on experience for his writing. A trained astrophysicist, he also holds an MBA and has been designated a Certified Trust and Financial Advisor. Share your thoughts and story ideas with him through Facebook (https://www.facebook.com/christophercarosa/)and Twitter (https://twitter.com/ChrisCarosa).
