A new economic indicator suggests there’s a 40% chance that the U.S. is already in a recession, potentially starting as early as March. This development builds on the well-known Sahm rule, which uses unemployment data to signal recessions. However, economists Pascal Michaillat and Emmanuel Saez have introduced a more comprehensive measure, incorporating job-vacancy data alongside unemployment figures.
The Sahm rule was triggered this month following a weak July jobs report, which showed a 4.3% unemployment rate. While Claudia Sahm, the economist behind the original rule, remains skeptical about the current situation, Michaillat and Saez’s indicator is flashing caution. Their measure points to a possible recession with a 40% probability, suggesting that the economic downturn could already be underway.
This new indicator could offer a more accurate tool for predicting recessions, especially in the uncertain post-pandemic economic landscape. It’s crucial for policymakers, investors, and everyday Americans to stay vigilant as the economic picture continues to evolve. With rising concerns about inflation, interest rates, and job market stability, this latest data adds another layer of complexity to the ongoing debate about the health of the U.S. economy.
