Rising US unemployment

Recent increases in the US unemployment rate and the activation of the Sahm rule have created turbulence in financial markets, yet the primary contributor to higher unemployment appears to be an increase in labor supply rather than significant job losses. Alternative analytical methods reinforce this view, indicating that the job market is simply normalizing after the tight conditions seen post-pandemic, with only a slight rise in layoffs.

This suggests a stable outlook for future consumption and continued economic expansion. The Sahm rule, which posits that a 0.5 percentage point rise in the three-month moving average of unemployment indicates the onset of recession, should be interpreted with caution as it is based on historical correlations rather than causation.

While past increases in unemployment have often foreshadowed larger job losses, the current analysis indicates that the recent uptick may not signal an imminent recession.