In early August, discussions about a potential recession gained momentum on “X” following the activation of the Sahm Rule. This economic signal warns of a possible recession when the three-month moving average of the national unemployment rate surpasses its 12-month low by more than 0.5%. As unemployment rises and the job market tightens amidst increasing national debt, America’s economic prospects have become a hot topic of debate, as reported by GlobalData's Social Media Analytics Platform.
Shreyasee Majumder, a Social Media Analyst at GlobalData, explains, “Opinions among influencers on the Sahm Rule's significance for the U.S. economy vary widely. Some see it as a reliable harbinger of economic downturn given the surging unemployment rates, which could prompt the Federal Reserve to lower interest rates in their next meeting. On the other hand, some argue that issues within the labor market are driven by unique factors stemming from the COVID-19 pandemic, like heightened retirement rates and changed immigration patterns, instead of a fundamental economic decline. These voices suggest that the Sahm Rule may not fully capture the current economic climate, advocating for a cautious analysis before declaring a recession is on the horizon.”
Highlighted below are some popular influencer perspectives as captured by GlobalData's Social Media Analytics Platform:
Barry Ritholtz, Chief Investment Officer at Ritholtz Wealth Management, remarks: “The Sahm Rule was crafted to identify when a recession had begun through rising layoffs. Historically, it hasn’t predicted recessions from unemployment levels this low or from increases in unemployment driven by higher labor force participation rates, indicating a demand for more workers...”
Jason Furman, a Harvard Kennedy School professor, states: “The Sahm recession indicator is now active. This is a variation of a rule from Goldman Sachs economists, forming the basis for the fiscal stimulus discussions many of us had in late 2007 and early 2008 during a similar unemployment rise.”
Frank Rotman, Founding Partner at QED Investors says, “The Sahm Rule has officially been triggered. We'll see if its prediction holds, but traditionally, a recession is generally underway when the unemployment rate climbs by half a percent from its 12-month low. We’re entering that zone.”
Dave Lauer, President and Chair of the Board at Urvin Finance, comments: “Though some claim the Sahm Rule's activation means we're in a recession, the reality is 'not quite'. It triggers at 50 basis points, and we’re close, but not quite there.”
Victoria Guida, an economics correspondent and columnist at Politico, notes: “The rise in unemployment activates the Sahm Rule, typically an early warning of a recession. @Claudia_Sahm suggests this time might differ, but it's unclear as the indicator tends to activate before other data solidifies.”
Source: GlobalData
