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Recession Indicators: Sahm Rule and Labor Market
Analysis of economic recession indicators, focusing on the Sahm rule and labor market data.
English
Australia
Labour MarketEconomicsLabor MarketUnemploymentRecessionEconomic Indicators
Reserve Bank Of AustraliaNational Bureau Of Economic Research (Nber)
Claudia SahmSaul EslakeMichele Bullock
- What is the Sahm rule and how does it work?
- The Sahm rule uses monthly unemployment data to determine if an economy is entering a recession. It compares the current three-month average unemployment rate to the lowest rate in the past year; if the current rate is 0.5 percentage points higher, it signals a potential recession.
- What alternative metric for recession does economist Saul Eslake propose?
- Economist Saul Eslake argues that a more effective measure of recession should focus on the labor market, suggesting a recession is defined by unemployment rising more than 1.5 percentage points within 12 months.
- Why is focusing on the labor market crucial for identifying and understanding recessions?
- While GDP growth is a common indicator of economic health, focusing on the labor market is crucial as recessions significantly impact jobs and livelihoods, leading to financial stress and mental health issues.
- Are there limitations to using simple rules like the Sahm rule for assessing economic health?
- The National Bureau of Economic Research (NBER) in the US considers various factors beyond GDP, such as personal income and employment, to determine a recession; even the Sahm rule has limitations due to changing labor supply.
- What is the current state of Australia's labor market and its relation to potential recession?
- The Australian labor market has been resilient despite global economic uncertainty. However, according to the Sahm rule, Australia has been in or near a recessionary danger zone for several months.