Numerous recessionary indicators are flashing red!
A recessionary indicator called the Sahm Index has been all over the news this week (specifically for those tuned into reports coming from the U.S.)
Named after its creator - economist and former Federal Reserve researcher, Claudia Sahm, - the Index is a pretty simple metric that tracks the unemployment rate in the U.S..
Specifically, it looks at how much the unemployment rate increases over a 3- month period, compared to its lowest point in the last 12- months.
Why the media excitement?
When the index shows a 0.5 percentage point increase, it seems to signal a recession long before it’s shown in the GDP figures (which require two quarters of negative growth to tell us the economy has officially tanked.)
Furthermore - since the 1960s, the Sahm indicator, has had a 100% success rate as you can see from the chart below.
Its creator has giving a cautionary warning that “this time it could be different” ..
“[The Sahm Rule] may not tell us what it’s told us in the past, because of these swings from labour shortages, with people dropping out of the labour force, to now having immigrants coming lately. That all can show up in changes in the unemployment rate, which is the core of the Sahm Rule.”