Paul Krugman Analyzes U.S. Employment Data, Suggests Pre-Recession Phase

According to Odaily, Nobel laureate and former New York Times columnist Paul Krugman has analyzed the U.S. non-farm employment report released on December 16, indicating that while it may be premature to declare an economic recession, the data suggests the economy is in a pre-recession phase. Krugman noted that the overall unemployment rate for November was 4.6%, higher than the average rate of 4% in April 2024. This figure is nearing the threshold of the 'Sahm Rule.' Due to a government shutdown, the Department of Labor was unable to collect crucial data for October. However, by interpolating the September unemployment rate of 4.4% and the November rate of 4.6%, it is estimated that October's unemployment rate was approximately 4.5%. These three months' unemployment data closely align with the Sahm Rule's prediction of an impending recession indicated by rising unemployment rates. Odaily notes that the Sahm Rule, proposed by former Federal Reserve economist Claudia Sahm, is an immediate recession indicator based on unemployment rates. The indicator is triggered when the U.S. three-month moving average unemployment rate rises by 0.5 percentage points or more compared to the lowest three-month average of the previous 12 months, typically signaling the early stages of a recession.