The Biden economy has come dangerously close to hitting one of the most reliable indicators of a recession as unemployment continues to rise at a steady gait.
According to federal data, unemployment rose to 4.1 percent, up from the 4 percent in June. This rate of increase is following the “Sahm Rule” which has been a reliable indicator of recession since 1970.
According to the rule, “when the three-month moving average of the jobless rate rises by at least a half-percentage point from its low during the previous 12 months, then a recession has started,” according to Fortune magazine.
Per Fortune:
Based on the latest unemployment figures from the Labor Department’s monthly report on Friday, the gap between the two has expanded to 0.43 in June from 0.37 in May.
It’s now at the highest level since March 2021, when the economy was still recovering from the pandemic-induced crash.
The creator of the rule, Claudia Sahm, was an economist at the Federal Reserve and is now chief economist at New Century Advisors. She has previously explained that even from low levels a rising unemployment rate can set off a negative feedback loop that leads to a recession.
“When workers lose paychecks, they cut back on spending, and as businesses lose customers, they need fewer workers, and so on,” she wrote in a Bloomberg opinion column in November, adding that once this feedback loop starts, it is usually self-reinforcing and accelerates.
Economists are hoping that the scamdemic has had some effect that has upended the Sahm Rule and maybe recession is not near, but only time will tell.
But, the truth is, this economy has hit several other indicators of a major problem.
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