For the consideration of some people.
The Sahm Rule for determining a recession onset in real time is based on a greater than 50 bps increase in the 3 month moving average unemployment rate relative to its low in the preceding 12 months. This is the picture, using the May 2022 employment situation release data.
Some people assert when polls of the public indicate a majority think we’re in a recession, we’re in a recession, definitionally. Some people believe that when there are two consecutive quarters of negative GDP growth, we’re in a recession. Well, any given person can define a banana as a spherical fruit, but it is sometimes useful to define what a recession is, as defined by the scholars who coined the term, or who have been understood to be the arbiters of the term in quasi official terms. From the NBER’s Business Cycle Dating Committee FAQs webpage:
Results from the survey (taken June 6-8), re: GDP, prices, recession:
Month-on-month vs year-on-year, and headline, chained, sticky price, 16% trimmed, and (for April) PCE deflator.
That’s a comment by a reader. The index is indeed correlated with recessions, but not necessarily with oil shock recessions only, nor is it always an indicator of a recession.
Today, we present a guest post written by Jeffrey Frankel, Harpel Professor at Harvard’s Kennedy School of Government, and formerly a member of the White House Council of Economic Advisers. A shorter version of this commentary appeared in Barron’s magazine, June 8, 2022. For a video interview, see BNN/Bloomberg, June 8.
With the release of employment last Friday, we have the following picture of series followed by the NBER BCDC.
The simple sum of the unemployment rate and the (y/y) inflation rate:
unadjusted for composition:
