The US economy may be on the verge of an unexpected recession, according to a leading economist, who expressed concern over the recent rise in the unemployment rate.
What happened: The unexpected rise in the unemployment rate, from 3.7% to 3.9% in February, sparked fears of a potential recession. Economist David Rosenberg pointed out that this increase could disrupt the “soft landing narrative” and potentially lead to an unexpected recession, Business Insider reported.
“Now that the unemployment rate is up 0.5 percentage points from the January 2023 cycle low, this upsets the soft landing narrative because once it rises that much from the lows, comes the recession that no one ever sees coming ,” Rosenberg said in a Friday note.
Rosenberg was referring to Sahm rulecreated by the economist Claudia Sahmwhich suggests a recession may be imminent when the three-month moving average of the national unemployment rate is 0.5 percentage point or more above last year’s low point.
See also: Jim Cramer Compares Nvidia Microchips to French Fries Amid Wealth Gap Debate: The Bottom Line Is… The Twain Will Never Meet
While the Sahm rule has not been triggered, Rosenberg remains cautious, pointing to other troubling factors in the jobs report. He noted negative revisions of 167,000 in the December and January payroll reports, indicating a stagnant job market. Additionally, while some sectors such as healthcare, government and restaurants have shown hiring strength, technology and banking have seen an increase in net layoffs.
Because matter: The warning of a potential recession comes alongside other indicators of economic instability. A veteran technical analyst, Milton Berg, recently predicted a 60% market crash, citing long-standing concerns about market stability. This warning was issued in the context of growing fears of an impending recession.
Despite these warnings, the U.S. economy has shown resilience in some sectors. For example, the United States has continued to be a major driver of global economic growth, although this position is challenged by several factors, including domestic political divisions and global uncertainties.
Also, CEO of JPMorgan Jamie Dimon He also expressed concern for the US economy, warning of a potential recession and the market’s underestimation of risks. Despite this, he does not foresee any systemic problems.
A key recession indicator, the spread between 10-year and three-month Treasury bond yields, has been flashing for more than a year, according to a note from DataTrek Research. This is a crucial sign of an impending recession.
Read next: Stocks Slump as Chipmakers Retreat from Highs, Bitcoin Retreats After $70,000, Gold Rises to $2,200
Image generated via Dall-E
Designed by Benzinga NeuroBy
Kaustubh Bagalkote
The GPT-4-based Benzinga Neuro content generation system leverages Benzinga’s extensive ecosystem, including native data, APIs, and more to create rich, timely stories for you. Learn more.