©MCCAIG via Canva.com
Possible Recession To Come After Unemployment Triggers Sahm Rule
November 13, 2023
The economic landscape is rife with speculation about the triggering of the “Sahm Rule,” a measure formulated by former Federal Reserve economist Claudia Sahm. She proposed that a 0.5% increase in unemployment from the cycle’s lowest point in the last 12 months typically signals a recession.
The chatter has been fueled by the rise in the unemployment rate from 3.4% in April to 3.9% in October. However, Sahm herself advises caution, stating that her rule is based on a three-month moving average, and we may not have tripped the trigger yet.
Other predictors of economic downturns include Michael Kantrowitz’s “10% rule” and Michael Darda’s rule for continuing jobless claims. Kantrowitz’s rule states that a 10% rise in unemployment has always preceded a recession. As of October, we’re at 7.7%. Meanwhile, Darda highlights that a 10% annual increase in jobless claims often flags a forthcoming recession — we’re currently witnessing a daunting 30% surge.
Further caution comes from California, the largest U.S. state by GDP, showing signs of a likely recession with an unemployment rate that rose from 3.8% a year ago to 4.7% in September.
However, as Sahm said, her rule uses a three-month rolling average, not a single month’s percentage. Currently, despite the rise, we haven’t yet hit the half-point increase. Also, the recent rise in the unemployment rate is more reflective of increased workforce participation than actual job losses, as there are more people working now than in April, so this could potentially mitigate recession concerns.
Strong personal spending continues, contributing to a healthy GDP growth rate, which doesn’t align with the Sahm Rule’s prediction of a cycle of layoffs and reduced spending. However, with the Federal Reserve’s aggressive interest rate hikes and a record $1.08 trillion in credit card debt, caution is advised, as these factors could impact the economic landscape. Sahm stated, “I’m a macroeconomist, so I’m pessimistic by my wiring. We want to hope for the best but prepare for the worst.”
Recent News
Massive Data Breach Hits Ticketmaster, Affecting 560 Million Customers
Ticketmaster has fallen victim to a significant cyber-attack, potentially compromising the data of up to 560 million customers. The breach was confirmed by Ticketmaster’s parent company, Live Nation, which revealed that a notorious hacking group, ShinyHunters, is behind the attack. The hackers are demanding a ransom of approximately £400,000 to prevent the data from being sold on the dark web.
Toyota Recalls 100,000+ Tundra and Lexus LX SUVs Over Engine Debris Issue
Toyota has announced a recall for over 100,000 Tundra pickups and Lexus LX SUVs in North America due to potential engine issues caused by machining debris. This recall affects certain 2022-2023 models of the Tundra and LX, which are equipped with the new V6 twin-turbo engine. The V6 twin-turbo engine has faced considerable scrutiny regarding its reliability, especially when compared to the previous naturally aspirated V8 engines.
Wordle and Worldle Battle Over Names
A legal dispute has erupted between the wildly popular word game Wordle and the lesser-known geography game Worldle, centering on the similarity of their names. Wordle, which was developed by Josh Wardle in 2021 and later acquired by the New York Times in 2022 for a substantial sum, has gained immense popularity. In this game, players have six attempts to guess a five-letter word.
FDA Issues Recall for Crecelac Goat Milk Infant Formula
The U.S. Food and Drug Administration (FDA) has issued a safety alert regarding Crecelac Goat Milk Infant Formula and other infant formula products imported and distributed by Dairy Manufacturers Inc. The alert highlights Cronobacter contamination concerns with Crecelac Infant Powdered Goat Milk Infant Formula. Although Dairy Manufacturers Inc. initiated a recall on May 24, 2024, due to non-compliance with FDA regulations, new findings of Cronobacter contamination have prompted further action.