This is an AI translated post.
Is the US Recession Warning Light Flashing? Questions Raised by Hurricane 'Beryl'
- Writing language: Korean
- •
-
Base country: Japan
- •
- Economy
0000-00-00 00:00:00
Select Language
The number of U.S. nonfarm payroll employees (employment statistics) in July 2024 was weaker than market expectations, and the unemployment rate also rose. As a result, the financial markets have focused on the 'Summers Rule', which is used as an indicator to gauge the timing of a U.S. recession.
The Summers Rule is a concept proposed by Lawrence Summers, a former economist at the Federal Reserve Board (FRB). It states that if the average unemployment rate over the past three months is 0.5 percentage points higher than the lowest unemployment rate over the past 12 months, a recession is considered to have begun. The unemployment rate for July, released in early August, was 4.3%, and the Summers Rule threshold was 0.53 percentage points. With the FRB poised to begin lowering interest rates, financial markets, which have been on high alert for recession signals, are on edge about the triggering of the Summers Rule.
However, recent statistics may have been distorted by temporary factors. One such factor could be the impact of Hurricane 'Beryl', which hit the southern United States in July.
The U.S. Bureau of Labor Statistics (BLS) stated that Hurricane 'Beryl' had no impact on these statistics. However, a closer look at the statistics reveals a significant increase in the number of people unable to work due to inclement weather compared to the same month in previous years, as well as an increase in the number of temporary layoffs. Also, in the state-by-state releases of initial unemployment claims, there has been a trend of increasing claims in hurricane-affected areas.
Considering these circumstances, it is likely that the July employment statistics included temporary downward factors. At a crucial juncture for determining the direction of monetary policy, applying a mechanical rule may not have been the most appropriate course of action. It remains to be seen whether the U.S. economy will achieve a soft landing and whether the FRB will begin lowering interest rates.
