The comments made by Lockhart look great on paper but what are the realities of the ideas. 

The markets applauded the better than expected Employment report .  Stocks opened up 100 points and it looks like a gain will be sustained.  The 9.6% unemployment rate, the NFP job loss for both headline and Private Sector jobs, the revisions were all better than expectations.  

However, historically, when employment starts to come down, there is a sharper move down in the rate as the economy recovers from the low.  We are not seeing that at all.

In 1982 when the unemployment rate peaked at 10.8% in December, 10 months later the employment rate was down 2% to 8.8% or 18.51% lower.  One year later the rate was down to 8.3%.  18 months later the rate was down to 7.2% — 3.4% lower than the peak.

In 1975 the rate peaked at 9.0% in May of 1975.  10 months later the rate was down to 7.6%.  The  decline equaled a 15.55% percentage decline from the peak. 

In 1992 the Unemployment Rate peaked at 7.8% in June 1992.  10 months later the rate was down to 7.0% or 0.8%.  Although less of decline than 1982 and 1975, the fall on a percentage basis was still a respectable 10.25%.

In 2003 the Unemployment Rate peaked at 6.3%.  10 months later the price reached 5.6% or 0.7% from the peak.  The decline represented a 11.11% decline from the peak.

In the current cycle the Unemployment Rate has moved from 10.1% in October 2009 and 10 months later the rate is down only 0.5%.  The percentage decline from the peak has been a scant 4.95%.  Since January of this year, the rate is down from 9.7% to 9.6% – only 0.1%.  That is not exactly zipping along.  Moreover, expectations of a sharper fall are not in the minds of the market economists.

A move to 6% would imply a percentage fall of 40.5% .  It took 52 months to do that in 1982 or 4 years and 4 months.  In the 1975, the percentage  fall never reached 40.5%.  In 1992 it took 66 months – or 5 1/2 years – to have the rate fall 40.5%.  In 2003, the rate did not fall 40.5%.

With the small fall to date, the record of 66 months seems like a good bet to beaten. 

Looking at the FRB’s own estimate, it sees the Unemployment Rate falling to 8.3%-8.7% in 2011.  A move to the best case scenario of 8.3% would imply a fall of 17.82% from the peak of 10.1%. 

In 1982 it took 10 months to lose that percentage (to 8.8%).  We are currently at 10 months now and at the end of 2011, we will be  26 months into the “recovery”.  At the 26th month in 1982, the rate was down to 7.2% from a higher peak of 10.8%.  An equivalent % move (33% decline) should have the rate down to 6.7%! 

By the Fed’s best scenario, the rate of 8.3% will be a full 1.6% higher than the 1982 equivalent (8.3% vs 6.7% of 1.6%).

The first 26th months are supposed to be the fast decline years.