"While America's labor market may not be collapsing, Moody's Analytics has highlighted that it is inching steadily closer towards a key recession indicator, with analysts now placing the probability of an economic contraction at around 40%. According to the Bureau of Labor Statistics (BLS), the unemployment rate for November edged up to 4.6%, continuing the creep higher that analysts have been nervously monitoring throughout the year."
"The Sahm Rule, invented by former Fed economist Claudia Sahm, is a recession signal that is activated when the three-month moving average of the national unemployment rate rises by 0.5 percentage points or more, relative to the minimum of the three-month averages from the previous 12 months. In November, it stood at 0.43. "We didn't quite trigger it this month but we're sort of on the precipice," DeAntonio said. "If it stays at 4.6% next month we'll trigger the Sahm Rule again.""
Unemployment rose to 4.6% in November, up from 4.2% a year earlier, with only 64,000 roles created and little net change since April. Analysts at Moody's Analytics place the probability of an economic contraction near 40%. The Sahm Rule triggers when the three-month moving average of unemployment rises by 0.5 percentage points relative to the minimum of the previous 12 months; the measure was 0.43 in November. Moody's economists said the economy is close to the Sahm threshold and could trigger it if unemployment remains at 4.6% next month. Last year's Sahm signal did not produce a recession after a Fed-engineered soft landing.
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