@Account Closed, @Andrey Y, Thank you for calling me out.
I said this about a year ago. My perspective is very similar. (And fortunately, the data is consistent with what I was talking about a year ago I think ;)
**TRENDS ARE CHANGING**
As of May 2016 in my graph above, the CA unemployment rate stood at 5.2% and dropping. I specifically noted that the unemployment rate tended to revert before the last 3 recessions, not long after the unemployment rate hit or went below 5.0%.
So where are we at today?
Aug 2017: 5.1% unemployment rate in CA
15 months after the May 2016 data, we're almost back where we were then. How? After reaching a low of 4.7% - the same as the low of 4.7% last seen in the Dotcom Dec of 2000 - the unemployment rate (gasp!) went up again. This is consistent with my expectation from a year ago. If you look back above at the May 2016 data when I first said this, you don't see any upward spike. It was all pretty much downhill smooth sailing. I based my premise of reversion on history - not any rough patches then. Clearly something has changed in the trend since then.
As Minh likes to say, history doesn't always repeat itself. But it rhymes. (And damn, sometimes it almost seems to sort of repeat itself too..)
Is there some sort of pattern here? Was I expecting that a year ago?
Well, maybe I got lucky, but I think yes. I didn't get out a divining rod orouija board or anything. Just looked at it from a third grader point of view ;) There's some point it doesn't cross for long. Then you get one of those vertical grey lines a bit later..
I'm not necessarily saying that this first reversion to an increase in the CA unemployment rate in about 7 years (look at the 7yr steady decline) is going to cause a recession tomorrow. You can see that it usually bounces around or stays near the bottom for a while, then starts increasing consistently, resulting in a recession - then we "find out" (officially) we are/were in a recession 9-15 months later. There is some minor improvement in the labor force participation rate, but not enough to save all this.
As we've seen from the 2005 - 2007 era, the govt, lending, and the marketplace can push the economy further than it's natural path should go. But it looks to me like the economy is telling us we've just gone past "as good as it gets," for the natural path of the economy. So I would hold by my original statement of 1-2 years, from last year.
I think there should be a recession starting in 2018, which would be officially identified by economists in 2019. Can it go further? Yes. Should it go further? Probably not. But the longer external stimuli try to force the economy beyond it's natural path, the more reckoning I think there will be in the next recession.
San Francisco tells the same story.
Trends are changing.
3.4% Unemployment rate for SF as of July 2017.
Up from 2.9% in my graph above as of May 2016.
Each cycle has a portion at the end where the years of trending improvements flatten out. And it looks like we're about there.
What do you guys think?
Am I crazy here?
Do the graphs tell a story..?
Again, my premise has always been that real estate appreciation in the SF Bay tends to go on a strong multi-year run after the unemployment rate has peaked, and starts to improve - and appreciation tends to be lowest in the years after the unemployment rate has approached or gone below its historical lows.
That's the reward/risk equation I approach with the cycle..
