Drop in Housing Starts Indicates Unemployment Is Headed to 9%

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http://www.wallstreetandtech.com/blog/archives/2008/05/unemployment_ho.html?&cid=nl_wallstreettech_week

Where is the economy headed? Some "experts" say the economy is ready to rebound, after a short contraction. Others think that the economy is just at the beginning of a long and painful recession. However, the truth may be hidden in data that tracks housing starts, according to University of San Francisco business professor Jon Fisher, who previously founded and sold his online authentication company Bharosa to Oracle. Fisher contends the unemployment rate may be headed to 9 percent.

Fisher says that history shows that as the number of new housing starts drops, the unemployment rate rises shortly thereafter. After analyzing new housing start data, in the next 12 months, Fisher says the U.S. could see unemployment rates as high as 9 percent, a rate not seen since 1983.

"This is important data given the number of layoffs projected on Wall Street," Fisher wrote in an email. "I think the numbers are a fraction of what we're going to see."

Numerous Wall Street firms have already announced layoffs totaling more than 83,000, including 15,500 from Citi, while New York City estimates it will lose 33,000 jobs in Manhattan alone.

more at link above

graph: housing starts: white, unemployment: orange