Recent Trends in Unemployment

First, the downtrend of unemployment after the financial crisis and the 2008-09 recession:

The gray line shows the rate of unemployment since January 2007. On today's graphs, the gray shows the FRED data from

https://fred.stlouisfed.org/series/UNRATE

The blue line on this graph shows that data for the Obama years, beginning about when the unemployment rate started falling. The red line, here a "linear" or straight-line trend, was calculated by Excel from the data indicated in blue on the graph. (For both graphs today, the blue line indicates the data Excel used to calculate the trend line.)

The change in unemployment, from  more or less above the trend line in 2012-2013 to more or less below the trend line in 2014-2015, is probably an indication that the economy was at last starting to do better by 2014. The change in the blue line to mostly horizontal in 2016, was due to other changes in the economy. Off the top of my head I'd say the Federal Reserve, increasing interest rates in late 2015 and after was the  cause of that relative-to-trend increase. (The Fed kept the interest rate at zero from late 2008 until December 2015.)

Not a linear trend, this time. Excel calls this one a second order polynomial.

I find it interesting that this Trump-years-sans-Covid trend line fits so well with the Obama-years data back to 2013 or before -- and also runs close to the gray data since early 2022. This suggests to me that, Covid shock aside, the rate of unemployment was all very much part of a pattern that had little or nothing to do with Donald Trump.

I note that the monthly unemployment rate hung in there at 3.6 percent from October 2019 to January 2020, then fell to 3.5 percent before skyrocketing in March as Covid made itself known. I figure the Covid shock to unemployment came to an end in March 2022 when unemployment again reached 3.6 percent.

That same month, March 2022, also happens to be when the Fed started raising the interest rate to fight the inflation that Jerome Powell had warned us about a year before, in March 2021. So it looks like the Fed was waiting for employment to get back to normal before they started raising interest rates. And in fact that is what they said they would do. In the transcript of the March 17, 2021 press conference, Powell said:

With regard to interest rates, we continue to expect it will be appropriate to maintain the current 0 to ¼ percent target range for the federal funds rate until labor market conditions have reached levels consistent with the Committee’s assessment of maximum employment...

(My bold.) But I'm not sure that decision was sound. Inflation went absolutely crazy between March 2021 and March 2022, while interest rates remained at zero. I think the Fed's "decision" was an excuse that Powell used because Trump had manipulated the Fed into agreeing to delay interest rate increases for a year, to let inflation go up to make Biden look bad. You know, election interference.