My 18-month-old feels his needs intensely, particularly those relating to strawberries. Similarly, investors today really, really want to know whether the US is in a recession, and although last week’s markets tantrum has mercifully ended, there is still some lip wobbling. But whereas I can judge whether my son has eaten enough (“that last one contains a worm”) the economic data is offering no such clarity. And a growing crop of “now-cession” indicators is only adding to the confusion.
Chief among these is the Sahm rule, originally intended by the economist Claudia Sahm to trigger a fiscal stimulus. It draws on the historical regularity that since 1970, every increase exceeding 0.5 percentage points in the three-month average of the unemployment rate relative to its low over the previous 12 months has coincided with a recession. Worryingly, in July this indicator flashed red.
