While unemployment is still historically low, its rate of increase could be a sign of deteriorating economic conditions. That’s where the so-called Sahm Rule comes in.
It says that when the three-month moving average of the jobless rate rises by at least a half-percentage point from its low during the previous 12 months, then a recession has started. This rule would have signaled every recession since 1970.
Based on the latest unemployment figures from the Labor Department’s monthly report on Friday, the gap between the two has expanded to 0.43 in June from 0.37 in May.
And: A key part of America’s economy has shifted into reverse.
Consumer demand seems to have tapered off so far this summer, according to surveys of American businesses that sell any kind of service to make a profit, ranging from restaurants to dental clinics. That weakness is also evident in the latest spending figures — a far cry from last year’s lucrative summertime spending spree when Americans shelled out for films and high-profile concerts.
The Institute for Supply Management’s latest monthly survey that gauges economic activity in the services sector showed that so-called new orders and overall economic activity unexpectedly slipped into contraction territory last month. The headline index fell to a reading of 48.8 in June from 53.8 in May as the new orders sub-index saw an even steeper decline, down to 47.3 from 54.1. (A reading above 50 indicates expansion while anything below that threshold points to a contraction.)
Previously: Payrolls Rise 206K After Huge Downward Revisions As Unemployment Rate Jumps To Three Year High. “In keeping with the BLS’ other favorite gimmick of representing part-time jobs growth as the primary driver of the US labor market, in June, the number of part-time workers rose 50K to 28.1 million while full-time workers dropped by 28K. This means that since June 2023, the US has added 1.8 million part-time jobs and lost 1.6 million full-time jobs.”