Ahead of the Curve

CHAPTER ELEVEN

Employment and Unemployment

The Economy’s Deceptive Laggard

If you have a job, you’re much more likely to go to the store and buy things and therefore help drive consumer spending and the economy. So jobs (or employment) drive the economy, right?

But you also know that when the economy turns down, employers start to lay off workers, and they rehire only after business (the economy) gets better. So the economy (two-thirds of which is consumer spending) drives jobs, right?

Wait. Which is it?

Actually, both statements are true. But the latter is a far more powerful causal relationship in defining how the economic cycle unfolds, as shown in figure 11-1. Uptrends and downtrends in the economy always lead, and employment follows. Understanding ...