The unemployment rate came in at 5.56% - almost down to 5.5%. Hmm. Going back as far as the beginning of 2014, the Fed was forecasting around 6.2%-6.4%. Was there anyone with the foresight and courage to forecast something like 5.6% by year end? 'Cause that would be somethin'. Hmm. Huh. :-) (Note for journalists, that's "Erdmann", with two n's. The second "n" stands for "Nailed it!")
Here is my chart of total unemployment, compared to insured unemployment - plus the zoomed in version. The black line was my unemployment forecast based on a linear trend in the decline of very long term unemployment. The red line was my unemployment forecast, assuming that after June 2014, very long term unemployment would stop declining. December came in between the two.
I will probably revisit these charts less often now, since the trend will be less pronounced as we proceed from here.
Next, a look at unemployment by duration and at my estimate of very long term unemployed workers. Most of this month's decline came in the shorter durations. Durations above 26 weeks are still a little persistent, suggesting that further declines in the unemployment rate might be tougher to come by. My estimate of very long term unemployment is showing a slight downward trend again, but this will probably not be a steep as it has been.
There could be some bounce back from here. I wouldn't be surprised if, several months from now, there is at least one month that still prints at 5.5% or 5.6%.
Looking at flows data makes sub-5% by the end of 2015 seem very possible. And, looking at flows data, it's hard to imagine that we could still be teasing around 5.5% a few months from now. We'll have to wait and see how the mystery unravels.
Interestingly, interest rates have dropped after the employment rate was published Friday. I think the market has moved on from unemployment levels to wage growth as the focus of potential Fed policy triggers.
I think I'll have a post up tomorrow on that topic.