Saturday, September 19, 2009

Charting the S&P 500 & Unemployment Rate: 1980 - 2009

This is what I did with my Saturday.

Hearing both a lot of debate about the merits / feasibility of a "jobless recovery" and chatter on CNBC about people feeling anxious regarding the sustainability of the stock market's ongoing rally, I wanted to look at a correlation between unemployment rates and the S&P 500 over the past big unemployment spikes / recessions. But I could not quickly find any charts making this connection. So, with historical S&P data from Yahoo! Finance and unemployment data from the Bureau of Labor Statistics, I put together my own chart, which is embedded below.

The only way it will be remotely legible is if you hit the "full" setting on the slideshow player. You can also download it, too. I've spent more time putting it together than analyzing it, but here is what I'm seeing at first glance:

- The early 80s period and the early 90s period are rather similar
- The degree of the moves in the early 00s period are substantially greater than the two earlier periods
- In all three of the prior periods, the Low (L) in the S&P was seen before the Peak (P) of that period's unemployment rate.
- After the Peak (P), the S&P didn't really dip back to test the lows much

We've seen a pretty dramatic recent low in the S&P (March '09) and unemployment seems to be nearing a peak / plateau period. Does this bode well for the S&P in the near term and intermediate future?

I'm also including a base version of the chart without all my add ons.