Claudia Sahm, the creator of recession indicator Sahm Rule says, the U.S is very close to recession
Federal Reserve economist Claudia Sahm has expressed concerns that while the US isn't currently in a recession, it is alarmingly close. She predicts that central bank policymakers might need to adjust their strategies in response to the increasing risks.
On Bloomberg Television’s Bloomberg Surveillance program, Sahm commented on the unexpected rise in the unemployment rate in July’s employment report, noting that this trend is historically consistent with the early stages of a recession. Although she acknowledged that the US might not be in a recession yet, the situation is precariously close.
The report revealed a significant slowdown in US hiring and an increase in the unemployment rate to 4.3%. This caused the three-month moving average to exceed the 12-month low by half a percentage point, activating the Sahm Rule. Sahm developed this statistical measure to guide fiscal policymakers on when to stimulate the economy to counteract a recession.
Sahm emphasized that the US economy, in a broad sense, is still in a position of strength and it is unlikely that the country is currently in a recession.
Fed going slow
Federal Reserve Chair Jerome Powell, prior to the release of the report, had indicated that the labor market was normalizing, citing low layoffs, solid spending, and an increase in investment as signs of a stable economy.
Also Read: 25% chance of U.S recession, says Goldman Sachs economists, should you be worried?
Amid financial market turmoil and rising panic, Sahm advised against immediate action by
