Now that the average price of gasoline in the United States is clocking in at all-time record levels for this time of year, especially in California, what effect will that factor have upon the official U.S. unemployment rate, which just clocked in at its lowest level since early 2009?

Unfortunately, that's the wrong question to be asking today, because it takes roughly two years for a major change in the price of oil and gasoline to play out and fully impact the U.S. unemployment rate. The right question to ask today is: "what was the price of gasoline doing two years ago that put the events in motion that are just now about to affect the U.S. economy?

The answer is revealed in our chart below, in which we've shifted the average price of motor gasoline in the United States forward in time by two years to visually correlate the price of gasoline with the recorded official U.S. unemployment rate for each month since January 1976 (or actually, since January 1978):

Here, we see that the U.S. unemployment rate has been tracking pretty closely with where the two-year time lagged price of gasoline in the U.S. would put it - including the "unexpectedly" low 7.8% unemployment rate that was just reported for September 2012.

The bad news is that if that correlation between the time-lagged price of gasoline and the U.S. unemployment rate continues, the U.S. is about to see a major spike upward in its unemployment rate, corresponding to the sustained surge in gasoline prices that began at the end of 2010.

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Blair31 Wrote: Oct 13, 2012 2:15 PM
I Remember 1978. I was a junior in high school then. Unemployment then was low. That was before
the Iranian Revolution. Gas prices were 50-60 cents a gallon, or maybe more, that was a year before they went to \$1.00 a gallon. Two years before it was \$1.25 a gallon, which as Lou Cannon, formerly of TIME magazine and later Ronald Reagan's official biographer wrote, was the price in 1980. What's the worst economy, 1980, 1992, or 2008? I'd have to say 1980 because inflation then was running at 8-9%, (later 10%), interest rates were 19%, (later 20%), and Carter was defeated in a landslide that November.

johnm h Wrote: Oct 13, 2012 11:39 AM
While true, oil price increase is a relative price and acts like a consumption tax on energy intensive goods. This requires a shift away from energy intensive products to goods that use less or productive processes that require less energy. Adjustment leads to temporary unemployment but it isn't a Macro issue that can be fixed with macro policies. If we can produce more, we should, if we can't we need to get out of the way of adjustment. Government always and everywhere thwarts adjustment.

birdfighter Wrote: Oct 13, 2012 10:39 AM
What I like is that the Federal govt does not include the cost of fuel or food in its index of calculating the "official" rate of inflation. The main reason the govt does this is because it owes cola money (cost of living increase) to many recepients, notably Social Security. This false statistic also allows Obama to boast about his low inflation. No transparency, just deception.

Wumingren Wrote: Oct 13, 2012 3:03 PM
We're spending very judiciously, nothing on entertainment, very little on anything else. Our major expenses are mortgage, insurance, medical, food and gas. Rises in food and gas prices do not escape anyone's notice, yet they are not included in the inflation formula. All our expenses are fixed, except for food and gas, and as those prices continue to rise, we look for ways to further cut our budget. I'm reluctant to let Internet go, because that's my only access to non-Leftist news. Budget cuts next year -- to accommodate Taxamageddon -- will come in the form of cheaper foods. I don't know how we'll manage that, as we are already eating an almost meat-free diet. We used to be middle class, now we're shopping at thrift stores.

Huskie Wrote: Oct 13, 2012 4:56 PM
right behind you...not good times

restoreliberty Wrote: Oct 13, 2012 9:52 PM
One of things I have done for the past 3 years is plant a garden and freeze as much as I can and I learned to can and put away a lot of vegetable soup for the winter months. I also started swapping clothes with family and friends, everyone feels like they got a little something new or something they have admired that belonged to someone else. I keep my heat on 52 degrees in the winter and run an electric plug in heater only in rooms being used. In the summer I turn off the downstairs AC and run the second floor AC on 78, if I'm gone for a few day I turn it up to 85. Every little bit helps.

James92 Wrote: Oct 14, 2012 9:32 AM
A few words from an older American ( 1938 model ). I believe that what we are seeing in the U. S. and much of the world is the rotten fruit produced by the Progressive form of government over the past several decades. Really, we haven't practiced true open market free enterprise in the U.S. since the era of Woodrow Wilson. The saddest part is that they have so warped what we had that built this great nation and then they demagoge what they have created over time and proudly state" see capitalism doesn't work any more." I'm so sad for my grandchildren and great grand-children. They will never see what could have been. The utopia on earth that the Progrssive strive for won't happen!

Greg1084 Wrote: Oct 13, 2012 10:16 AM
How many times does it have to be said? In the history of the world there has never been a sustained economic expansion in the absence of an increase in energy consumption. And this increase is either due to a lowered cost, increased supply or change in source to one more productive, abundant and cheap. We have oil. We have coal. We have gas. And we have know-how. Let us put all three to work and see what happens, because if we can't grow our economy, we will never be able to dig ourselves out of the hole the progressives have dug us into.

Floyd35 Wrote: Oct 13, 2012 9:37 AM
I don't see how unemployment can help but become worse under the present administration. Why? Because of fuel prices. Our money is going our of the country to buy fuel.... and at an exorbitant prices. There is no plans to drill more, or to process more here at home.

Unless Romney/Ryan get in we are in BIG trouble. Taxes will rise, unemployment will rise. All commodity prices will rise and we will fall deeper, and deeper, in debt, and as wed fall, we will fall faster, and faster. Only fools, and traders, who are willing to sell out their fellow countrymen, can even begin to consider voting for the Obama/Biden ticket.

Vote for common sense and a retrun to prospirity. Vote Romney/Ryan for 2012 and beyond!

ricksmom Wrote: Oct 13, 2012 6:38 AM
Of course these exorbitant gas prices impact employment. Middle class and lower middle class are confined in the number of miles they can afford to work & especially to look for a job. These people could not afford to trade in their cars in Obama's brainless scheme 'cash for clunkers' and buy a new electric car. They certainly could not afford the money it would add to their home power bill.

Like all Obama's schemes, his solutions only benefit his cohorts. To continue to believe that Obama cares is self-deception of the highest degree.

Every Obama scheme is going to cost middle/low class more in taxes but he will be gone before the full impact hits people. Then they will realize 'they've been had!

olddog39 Wrote: Oct 13, 2012 5:59 AM
Couple all this with an increase in minimum wage and employers will also increase layoffs. The increase in wage rates, without increase in profitability, leads to shorter hours for part time employees and hence lower take home pay.

justme16 Wrote: Oct 13, 2012 8:13 AM
Increase layoffs due to Obamacare..
Reduce hours to thirty or less..
Lay off 700,000 workers from the defense industry
Less money coming in in revenues from social security, medicare, income tax
Higher gas prices
Higher prices across the board

justme16 Wrote: Oct 13, 2012 8:14 AM
Isn't "FUNDAMENTAL TRANSFORMATION" a wonderful thing?

FletchforFreedom Wrote: Oct 13, 2012 1:35 AM
I must disagree that unemployment is NECESSARILY ready to explode. More than at any other time in the last half century, the outcome of an election bears significantly on the economic outlook. A fair amount of unemployment is inflated due to concerns that Obamacare will be implemented and that the fiscal cliff (the tax portion, not the spending portion) will be imposed. Likewise, expectations that continued barriers to energy exploitation (or possibly more) have an impact on the price of oil in the global market. Much of the inflationary damage has already been done but will not flow through the system until some level of confidence is restored to the banking system.

FletchforFreedom Wrote: Oct 13, 2012 1:38 AM
In the meantime, an Obama loss (even more than the corresponding Romney victory) would have a notable favorable impact on both employment and oil prices. Both come with a caveat - if Romney is unable (say, sue to Dem Senate intransigence) to make headway on Obamacare, tax policy or energy policy - and within a reasonable period of time - that beneficial impact will be short-lived and the explosion will be inevitable.

MarineCorpsVet Wrote: Oct 13, 2012 9:34 AM
You're assuming of course, little miss Mary Sunshine, that there are going to be any Dems left in the Senate.

Kiffur Wrote: Oct 13, 2012 3:56 PM
Unfortunately, there will be. I live in NYC and - also unfortunately - know very few conservatives, or even independents. And no matter how often I disagree with their political views (politely, of course; my mama didn't raise me to be a poltroon like VP Biden!) I can't make a dint. They accept completely the talking points they get from the NYTimes, MSNBC, and the major networks. What I say HAS to be wrong because it's right-wing extremism. *sigh*

Kiffur Wrote: Oct 13, 2012 4:00 PM
Sorry.... didn't realize that my comment from 3:56 pm would not indent directly under MarineCorpsVet's post. My post was a direct response to his (hopeful) comment that there would be no "Dems left in the Senate". Double *sigh*... Would that it might be true in 2013!

DoubleC Wrote: Oct 14, 2012 3:02 PM
Boy, are you right, I live in South Florida, in a democratic county and work in a heavily democratic area. I've heard a few people say they're voting for Romney this time, but the majority of them are stuck on stupid, and it doesn't get any dumber than MSNBC, but they still come in every day spouting all their talking points.Most of them are New Yorkers, by the way....But I love the weather, the beach and my apt., it's sad though to think these people have the power to ruin our whole country and way of life just because they can't see the Commie takeover that could be coming. They should have to live in a communist country, elsewhere if that's what they want so bad. In the 1950's the communists said they would take us over from within...