In July, the Bureau of Labor Statistics revealed that the unemployment rate climbed to 4.3 percent, the highest it has been since October 2021. This uptick occurred as the economy added a meager 114,000 jobs, much lower than expected. Subsequently, the stock market experienced a decline, with the Nasdaq, known for its focus on technology companies, dropping by 10 percent from its peak.
The uptick in unemployment has activated the Sahm Rule, a method that has accurately anticipated every recession since 1970. According to this rule, when the three-month moving average of the unemployment rate surpasses half a percent higher than the lowest rate observed in the past 12 months, it signals the early stages of a recession. Presently, the average unemployment rate over the last three months stands at 4.13 percent, which is 0.63 percent higher than the low of 3.5 percent recorded in July 2023.
