Do Not Use the Sahm Rule Recession Indicator on States

The United States has been facing economic challenges for the past two years, with a brief respite entering 2024. However, the alarms are ringing once again, and economists are not focusing on usual indicators such as an inverted Treasury market yield curve or low consumer and business sentiment. Instead, they are pointing to rising unemployment rates in several states as a potential sign of an impending recession – or even one that may already be here.

One of the primary reasons for these warnings is a recession indicator known as the Sahm rule, developed by an economist. The premise of this rule is simple: if the three-month average of the unemployment rate is half a percentage point or more above its low in the prior 12 months, it indicates that the economy is in a recession. When applied to individual states, this rule suggests that 20 of them should be in a recession, as they collectively account for more than 40% of the US labor force, including California, which alone represents 11%.

The implications of these warnings are significant, as a recession in even just a few states could have a ripple effect on the broader economy. It is essential for policymakers and businesses to closely monitor these indicators and take appropriate actions to mitigate the potential impact of a downturn. Only time will tell whether these warnings are accurate, but it is crucial to be prepared for any economic challenges that may lie ahead.

Furthermore, some experts suggest that global economic conditions could also have an impact on domestic markets. For instance, rising inflation rates in Europe and Asia could lead to higher interest rates in America and negatively affect growth prospects.

Overall, while there are many factors at play when it comes to predicting economic downturns

By Aiden Johnson

As a content writer at newspoip.com, I have a passion for crafting engaging and informative articles that captivate readers. With a keen eye for detail and a knack for storytelling, I strive to deliver content that not only informs but also entertains. My goal is to create compelling narratives that resonate with our audience and keep them coming back for more. Whether I'm delving into the latest news topics or exploring in-depth features, I am dedicated to producing high-quality content that informs, inspires, and sparks curiosity.

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