Recession Indicator Triggers: Sahm Rule Signals Economic Slowdown
Closely Monitored Benchmark Raises Concerns
Amidst Hiring Slowdown and Rising Unemployment
Attention-grabbing data have emerged, painting a concerning picture of the U.S. economy. The Sahm rule, a closely tracked recession indicator, has been triggered, raising alarm bells among economists and policymakers.
The Sahm rule, developed by Federal Reserve economist Claudia Sahm, signals the onset of a recession when the three-month moving average of the national unemployment rate (U3) exceeds 0.5%. As of July 2024, this benchmark has been reached, indicating a potential economic downturn.
The latest data release from the Bureau of Labor Statistics shows that U.S. hiring slowed significantly in July, with the unemployment rate climbing to its highest level since August 2021. This increase in joblessness has triggered the Sahm rule and raised concerns about the trajectory of the economy.
Economists and investors are now closely monitoring the situation, as the Sahm rule has a strong track record in predicting recessions. In past economic downturns, the indicator has been triggered well in advance, providing valuable warning signs.
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