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Tuesday, July 23, 2024

Why The U.S Isn’t in a Recession – Yet

Recent economic data has sparked discussions about the possibility of a recession. The unemployment rate unexpectedly rose to 4.1%, up from 4.0%, surpassing consensus estimates. Additionally, private sector non-farm payrolls significantly underperformed, with only 136,000 new jobs added, well below projections. While these figures have raised concerns among some investors, it’s premature to conclude that we’re in a recession.

Understanding the SAHM Rule

To better assess the current economic situation, let’s examine the SAHM Rule, a reliable recession indicator developed by economist Claudia Sahm. This rule utilizes unemployment rate data to determine whether an economy is in recession.

The SAHM Rule states that a recession is likely underway when the three-month moving average of the national unemployment rate increases by 0.5 percentage points or more relative to its lowest point in the previous 12 months.

Applying the SAHM Rule to Current Data

https://fred.stlouisfed.org/series/SAHMREALTIME#

Analysis of the latest data reveals that the current increase in unemployment (0.43 percentage points) falls short of the 0.5 percentage point threshold established by the SAHM Rule. This suggests that despite recent economic headwinds, we are not currently in a recession.

While we’re not in a recession according to the SAHM Rule, the current economy does present some risks:

  1. Proximity to the threshold: At 0.43 percentage points, we’re approaching the 0.5 percentage point mark that would signal a recession.
  2. Continued unemployment rise: If unemployment continues to increase, we could cross the threshold in the coming months.
  3. Interest rate impact: Persistently high interest rates could further strain the economy, potentially pushing us into recession territory.
  4. 2024 outlook: If current trends persist, there’s a possibility of entering a recession in 2024.
Lazarus
Lazarushttps://ljlnews.com
Lazarus Lucas is the Publisher, editor, and creator of LJLNews. Stock Market enthusiast, with an interest for politics. Independent trader, analyst, and asset manager. Lazarus publishes articles on LJLNews with technical analysis on various markets, such as currencies, stocks, and commodities. Contact: Lazaruslucas@ljlnews.com

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