>> Seriously, what does this mail-list think would happen to the
>> unemployment rate in the U.S.A. if the Dow were to go to 3000, or even
>> 5000? And how long do you think it would take before the layoffs began
>> in earnest?
>>
>> Yours WDK - WKiernan at concentric.net
>
>Perhaps absolutely nothing.
The last serious, extended bear market in the U.S. was 1973-74, which ran slightly ahead of the 1974-75 oil shock recession. Some relevant high points:
VS. HIGH/
STOCKS LOW EMPL UNEMPL LANDMARK
1/73 118.42 75,474 4.9% stock market peak 10/73 109.84 -7.2% 77,502 4.6% unemployment trough 11/73 102.03 -13.8% 77,833 4.8% business cycle peak 10/74 69.44 -41.4% 78,569 6.0% employment peak 12/74 67.07 -43.4% 77,565 7.2% stock market trough
3/75 83.78 +24.9% 76,419 8.6% business cycle trough
4/75 84.72 +26.3% 76,298 8.8% employment trough
5/75 90.10 +34.3% 76,459 9.0% unemployment peak
So, stocks had already lost 7% from their peak when unemployment made its low. The official recession birthdate was November 1973, a month after the low in unemployment. Employment held up though for almost another year, though unemployment crept upwards; employment started falling rapidly just as the stock market was bottoming. The market recovered 25% off its lows by the time the recession was officially over.
The market's movements didn't cause the business cycle - it just reflected the sharp rise in interest rates engineered by the Fed. The fed funds rate went from 3.50 in January 1972 to 5.94 in January 1973, and then nearly doubled to a peak of 10.78% in September 1973.
Doug