‘Concerning’ Economic Indicator Predicts Imminent Recession After 75 Years of Accurate Forecasts

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As a seasoned analyst with over three decades of experience navigating financial markets and economies, I find the current state of the U.S. economy to be a cause for concern. The four consecutive months of rising unemployment rates, reminiscent of the 2008 Financial Crisis, is an unsettling echo from our past. History has shown us that this pattern often precedes a recession.

An “indicator” of the U.S. economy, which has been accurate in predicting recessions for the past 75 years, is now suggesting that a recession might be imminent.

Based on a recent report from Kobeissi Letter posted on microblogging platform X, the U.S. unemployment rate has increased for four straight months, marking its longest uninterrupted rise since the 2008 Financial Crisis.

As an analyst, I’ve observed an upward trend in the unemployment rate. It stood at 3.8% in March but has since climbed to 4.3% in July, marking its highest point since October 2021. Historically, when the US unemployment rate has remained elevated for four consecutive months, as it has now, our economy has typically fallen into a recession, according to the outlet’s data from the last 75 years.

There’s a troubling trend emerging: The U.S. unemployment rate has climbed for four months straight, which is the longest such streak since the 2008 Financial Crisis. Historically, when unemployment persists for four consecutive months, it often signals that the American economy is heading towards a recession. Currently, the jobless rate is on the rise…

— The Kobeissi Letter (@KobeissiLetter) August 7, 2024

The Kobeissi Letter noted that the employment rate in the U.S. dropped to a record low of 3.4% last month, marking the lowest figure since the onset of the COVID-19 pandemic in 2020 and falling below the previous average of 3.8%, indicating a shrinkage in the American job market.

As a crypto investor, I’ve noticed a growing concern about an imminent economic downturn. The recent surge in U.S. unemployment rates has set off another critical warning sign, causing a widespread sell-off in the market that erased around $5 trillion from global equity values.

When unemployment rates increase significantly in the United States, it activates the Sahm Rule – a tool used to identify economic recessions. This rule compares the three-month moving average of the U.S. unemployment rate with its lowest point over the past 12 months. If the unemployment rate increases by 0.5% from that low, the Sahm Rule is triggered, signaling potential economic downturn.

Claudia Sahm, a former Federal Reserve macroeconomist, named the Sahm Rule, but she suggests that the unusual post-COVID-19 labor market might make this rule less effective at predicting recessions, as reported by Yahoo Finance.

According to reports, Sahm expressed doubt about the current state of the U.S. economy being in a recession due to strong consumer spending. However, she found issues within the labor market to be concerning and warned that these problems might signal a potential recession in the coming months.

After renowned economist Henrik Zeberg reinforced his forecast of an impending recession, which he predicts will be preceded by a final spike in crucial market sectors, their subpar results could possibly signal one of the most severe economic downturns since 1929 – potentially marking the worst bear market in Wall Street’s history.

Remarkably, the Hindenburg Omen – a specialized tool used to predict possible stock market collapses – is now showing signs, having done so only a month after its last warning. This has sparked apprehension among investors, suggesting a potential stock market decline may be imminent.

Based on my years of experience in the stock market, I’ve found that one useful tool for identifying potential market crashes is by monitoring an indicator that compares the percentage of stocks reaching new 52-week highs and lows to a specific threshold. In my career, I’ve noticed that when the number of stocks hitting both extremes surpasses a certain level, it often signals increased risk, as it did during the 2008 financial crisis. So, if this indicator is triggered in today’s market, I would be cautious and closely monitor the situation for signs of an impending crash.

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2024-08-09 01:06