• Housing base in January 1970-Unemployment rate peaks in December 1970 (11 months)
• Housing base in February 1975-Unemployment rate peaks in May 1975 (3 months)
• Housing base in November 1981-Unemployment rate peaks in November 1982 (12 months)
• Housing base in January 1991-Unemployment rate peaks in June 1992 (17 months)
• Housing base in July 2000-Unemployment rate peaks in June 2003 (35 months- but that deterioration had more to do with equities than housing. Hence the peak in unemployment was extremely low at 6.3%)
Obviously with the fact that we have had a severe credit crunch, a severe housing downturn and a severe bear market in equities all at the same time the tendency would be to expect a fairly long timeframe between the base in housing (whenever it comes) and the peak in unemployment.
That in effect suggests it could be a long time before the FED tightens again and/or if they tighten too early they may have to back track on that move.
FED funds and unemployment rate
• Over the past 25 years the FED has waited between 6 and 20 months after the cyclical peaks in unemployment (4 occasions) before engaging in a full tightening cycle
So it is a case of watching this space for any nascent signs of stabilsation in housing to give us at least a shot in determining when that would filter into some stabilization in credit, the economy and ultimately unemployment.
As yet it is still too early to make that call