Related Topics
Economy , US Markets

What to Make of the 3.9% Jobless Rate (You Might Be Shocked)

Economic data numbers don’t lead the stock market – they LAG it

by Bob Stokes
Updated: May 09, 2018

You might be shocked to learn that a milestone low in the unemployment rate is usually a sign that an economic downturn is just ahead -- not a continuation of an upturn.

You probably heard the recent news that the April 2018 unemployment figure came in at 3.9% -- a rare low that was last hit in December 2000.

But, stop a moment to think about what was happening at that time. Stocks were already in the midst of a bear market that had started almost a year earlier, in January 2000, and the DJIA would eventually surrender about 40% of its value through October 2002. Moreover, a recession started just three months later, lasting from March 2001 through November 2001!

But, let's explore the historical data further, courtesy of this Fed chart which goes back to 1948 and takes us through that 3.9% jobless rate in April 2018:


Notice that recessions, which are shown in the blue-shaded areas, followed nearly all significant lows in the unemployment rate! This is just the opposite of what most people would expect.

Indeed, the jobless rate in May 2007 was a relatively low 4.4%. Just four months later, stocks topped and the economy eventually went into the worst downturn since the Great Depression. What's more, as a side note, the stock market bottomed in March 2009, and the jobless rate hit a recession high of 10% in October 2009.

There is an explanation: Economic numbers follow the stock market. In other words, the April 2018 glowing jobs report is what to expect after a prolonged stock market rally like the one we've had since 2009. Put yet another way, jobs figures should be viewed as an effect of what's already occurred, not an indicator of what's ahead. If anything, you should be taking it as a bearish indicator -- history certainly has enough evidence to support this view.

Indeed, most other financial and economic developments are also reflections of what's already occurred.

So, what does create the market's trend?

The answer is investor psychology, as reflected in the Elliott wave model.

Get our analysts' insights into what the Elliott wave model is revealing about the stock market's current position and what to expect next.

An Entire Team of Elliott Wave Experts … on YOUR Side

You might be one of those rare investors who is fully equipped to navigate financial markets alone. Then again, you may find that our deep bench of highly experienced Elliott wave analysts will prove highly useful to you.

For a full 30 days, you have nothing to lose.

Consider this quote from the Wall Street classic, Elliott Wave Principle: Key to Market Behavior, by Frost & Prechter:

Without Elliott, there appear to be an infinite number of possibilities for market action. What the Wave Principle provides is a means of first limiting the possibilities and then ordering the relative probabilities of possible future market paths. …. the probability that a turning point is at hand can suddenly and excitingly rise to nearly 100%. It is a thrilling experience to pinpoint a turn ….

Do yourself a favor: "Be there" when our analysts pinpoint the next critical market turn.

Learn how to get started with our generous risk-free offer by reading below …

Elliott Wave International’s Financial Forecast Service

All month long, FFS shows you the patterns in U.S. stock indexes, bonds, gold, silver, the U.S. dollar, as well as market psychology and cultural trends. We show you where the trend is now, and when prices should turn -- specifically, we show the pattern at multiple degrees of trend, with precise risk/reward calculations. If you have fewer surprises, you can be better prepared.

Here’s how it works:



Subscribe now and read the current issues.



Fine-tune your portfolio plan.



Relax. Watch the markets with your targets in mind.

Your Financial Forecast Service Team Helps Put YOU in Control of the Market’s Trends and Turns

Your Financial Forecast Service guides -- three of the best-known market analysts in the world:

  1. 1. Robert Prechter, Author of 16 market-related books, New York Times Best-Selling Author and Editor of Elliott Wave Theorist
  2. 2. Steven Hochberg, Editor of the Short Term Update and Co-editor of The Elliott Wave Financial Forecast
  3. 3. Peter Kendall, Author of The Mania Chronicles and Co-editor of The Elliott Wave Financial Forecast

As featured in:

Here's what you get with the Financial Forecast Service

Every Month

At the end of each month, you get a 30-60 day look ahead at the markets. Elliott Wave Financial Forecast lays out expected trends and turns in stocks, gold, USD and bonds.

3x Per Week

At market close every Monday, Wednesday, and Friday, you get the Short Term Update, alerting you to what’s changed and what’s upcoming in the next several days.

Latest Research

Every month, Robert Prechter sends you his latest research about waves of social mood in the markets in the Elliott Wave Theorist, so you always know the full picture.

Start Your Subscription Now


for 1 month of unparalleled market insights