After a protracted interval the place the US labor market outperformed even a few of the extra optimistic predictions, the July 2024 numbers got here in under expectations with weaker employment progress and the unemployment price rising to 4.3%. Whereas from a historic standpoint 4.3% stays low and never removed from estimates of the equilibrium price of unemployment, the truth that unemployment has now elevated for a number of months, has began a dialog about whether or not these figures can sign the start of a recession.
A few of this dialog is motivated by an indicator proposed by economist Claudia Sahm and named after her because the Sahm rule. This indicator was initially created to determine recessions in actual time in order that it might be utilized by coverage makers to set off supporting insurance policies. The indicator appears at how unemployment compares with latest ranges. Traditionally, a rise of 0.5% relative to baseline is a powerful indicator of the start of a recession. Within the post-WWII interval this indicator has produced two false positives though in each circumstances a recession adopted quickly after (see Sahm (2024) for an in depth description of the indicator).
Support authors and subscribe to content
This is premium stuff. Subscribe to read the entire article.
