Absurd "Stress Test" Economics Scenarios

So, the Feds put out their "stress test" economic scenarios this afternoon. CR did a good post on the economic scenarios being used for the stress tests.

They are using an assumption of 8.4% unemployment at the end of 2009. Their worst case scenario is 8.9%.

Unemployment is already 7.6%. It has increased 40bps per month for each of the past two months. It is up 270bps year-over-year, which is 23bps monthly. The Feds would have us believe that unemployment will only worsen between 80 and 130 bps over the next 11 months, for a pace of between 7 and 11 bps per month.

In order for the Feds to be correct, the unemployment rate would have to be hitting an inflection point right now and the rate of increase would have to slow dramatically. This is absurd and in no way is it the worst case scenario.

Here's another interesting fact: California, Washington DC, Michigan, Nevada, Oregon, Rhode Island, South Carolina already had worse unemployment rates, in December, than the worst case stress test scenario.