When everyone was speculating about whether the U.S. economy would fall into recession and when it would fall, Sister Mu Tou made a surprising statement yesterday, saying that the recession has already begun. In the latest report, Deutsche Bank analyst Jim Reid gave what he thinks is the best leading indicator for predicting that the U.S. economy will fall into recession – the number of continuing jobless claims (hereinafter referred to as “continuing jobless claims”).
Since data was available in 1960, the number of continuing jobless claims in the United States has been able to accurately determine that the economy is in recession, and it can be said to be very accurate and timely to signal about two months in advance. How the metric is used: When continuing claims for unemployment benefits rise more than 11.5% from the previous year’s low level, the roughly two-month countdown to a recession begins.
The low point for continuing jobless claims in the current cycle was 1.306 million hit on May 20, 2022. It is up less than 1% so far to 1.315 million. Calculated at an increase of 11.5%, the data needs to reach at least 1.456 million before the countdown to the recession begins.
Next week is a graph going back to 1966, with the yellow line showing the trough in continuing jobless claims and the gray area showing the economy entering a recession.
Currently, the number of Americans filing for unemployment benefits for the first time (initial jobless claims) has risen from a low of 166,000 in March to 229,000 last week. The two series (initial claims vs. continuing claims) correlate very well over time, so if continuing claims keep pace with initial claims, that would be enough to confirm, Reid wrote. A U.S. recession is imminent. However, the relevant data is seasonally adjusted, and the non-seasonally adjusted data is still hovering at the bottom, so Deutsche Bank believes that there is no need to interpret the increase in the data for the time being.
Financial and financial blog Zerohedge commented that in any case, according to Reid, when the data on continuing jobless claims is released at 8:30 a.m. ET on Thursday, it will be worth watching for the foreseeable future.
The Deutsche Bank asset allocation team published an article last week on what U.S. recession indicators in the short, medium and long-term are telling us. The bottom line is that most leading indicators 6-14 months ahead of recession are warning; most leading indicators 1-5 months ahead of recession are giving vague signals; most recessions are in progress or late In some cases indicators have not yet given a signal.
Federal Reserve Chairman Jerome Powell, speaking on Wednesday, reiterated his long-standing view that the U.S. economy is strong enough to deal with tightening monetary policy, households and businesses are financially healthy and the labor market is “very strong” and a recession should be avoided. But he also admitted that in the context of the sudden outbreak of conflict between Russia and Ukraine, the task of achieving a “soft landing” has “obviously become” more challenging in recent months, “there is no guarantee of a successful soft landing, and the path to achieve a soft landing has changed. narrower.” He said the longer high inflation persists, the more difficult the path to a “soft landing” will become, as it increases the likelihood that public inflation expectations will spiral out of control.