Political  Calculations

How much of an effect do high gasoline prices have upon the rate of layoffs in the U.S. economy?

Today, following the initial confirmation of our hypothesis that they do have a significant effect as measured by the number of new jobless claims filed every week, we're going to attempt to quantify how big an impact that high gasoline prices has upon the employee retention decisions of U.S. employers.

We define "high gasoline prices" as being when the national average price of a gallon of regular unleaded gasoline in the United States rises above $3.50 per gallon, in terms of 2011-12 U.S. dollars. This price level appears to be significant in affecting both the spending of U.S. consumers, who respond by cutting back their spending on other goods and services, and the cost of doing business for U.S. employers, who face higher fuel and transportation costs, both directly and indirectly through their supply chains.

Residual Distribution for Seasonally-Adjusted Initial Unemployment Insurance Claims, 26 March 2011 - 28 July 2012

Previously, we've observed that whenever the national average price of gasoline crosses this level, the number of seasonally-adjusted initial unemployment insurance claims that are filed each week is affected some two to three weeks later. If it rises above the $3.50 per gallon mark, we observe an upward shift in the number of new jobless claims being filed and if it falls below it, we observe a downward shift in the number of new jobless claims being filed each week.

Political Calculations

Political Calculations is a site that develops, applies and presents both established and cutting edge theory to the topics of investing, business and economics.

Be the first to read Political Calculation's column. Sign up today and receive Townhall.com delivered each morning to your inbox.


Get the best of Townhall Finance Daily delivered straight to your inbox

Follow Townhall Finance!