WASHINGTON (AP) — A surprising rise in the U.S. unemployment rate last month has rattled financial markets and set off new worries about the threat of a recession — but it could also prove to be a false alarm.
and set off new worries about the threat of a recession — but it could also prove to be a false alarm.
Worries about a recession are also quickly politicized, even more so as the presidential election intensifies. Former President Donald Trump's campaign on Friday said the jobs report is “more evidence that the Biden-Harris economy is failing Americans.” Named for former Fed economist Claudia Sahm, the rule holds that a recession is almost always underway already if the three-month average unemployment rate rises by half a percentage point from its low of the past year. It’s been triggered in every U.S. recession since 1970.
“This pandemic era has been one in which so many apparent rules have been flouted,” Powell said at a news conference. “Many received pieces of received wisdom just haven’t worked, and it’s because the situation really is unusual or unique.” The inverted yield curve, meanwhile, is also seen as a recession signal because of the expectation that a recession occurs when the Fed rapidly boosts its benchmark interest rate, which it raised 11 times in 2022 and 2023. Anoccurs when the interest rate on shorter-term Treasury bonds, such two-year notes, rises above the rate on a longer-term bond, such as the 10-year Treasury. The switch happened in July 2022 and yields have been inverted ever since, the longest inversion on record.
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