This is an AI translated post.
Is the US recession warning light on? The question posed by Hurricane ‘Beryl’
- Writing language: Korean
- •
-
Base country: Japan
- •
- Economy
0000-00-00 00:00:00
Select Language
Summarized by durumis AI
- While the number of non-farm employees in the United States in July showed weak figures, raising the possibility of the ‘Saam Rule’ being triggered, it is likely that there was a temporary impact due to Hurricane ‘Beryl’ that occurred in July.
- The US Bureau of Labor Statistics has denied the impact of the hurricane, but an analysis of the statistics shows an increase in the number of disabled and temporarily laid off workers due to bad weather.
- Therefore, it is likely that the July employment statistics reflected short-term downward factors, and it is necessary to judge whether the US economy will achieve a soft landing through further analysis of indicators.
The US nonfarm payroll employment data for July 2024 (employment statistics) showed weaker-than-expected figures and an increase in the unemployment rate. This has led to a surge in interest in the "Summers Rule" in financial markets, a measure often used to gauge the timing of a recession in the United States.
The Summers Rule, a concept proposed by Lawrence Summers, former chief economist of the Federal Reserve Board (FRB), states that a recession begins when the average unemployment rate over the past three months exceeds the lowest unemployment rate over the past 12 months by 0.5 percentage points or more. The unemployment rate for July, announced in early August, was 4.3%, putting the Summers Rule value at 0.53 percentage points. With the FRB poised to begin cutting interest rates, financial markets, which have been keenly watching for signs of a recession, were on edge over the potential activation of the Summers Rule.
However, it is highly likely that recent statistics have been distorted by temporary factors. One such factor is the impact of Hurricane "Beryl" that hit the Southern United States in July.
While the US Bureau of Labor Statistics (BLS) stated that Hurricane "Beryl" had no impact on the statistics, a closer examination of the data reveals a significant increase in the number of non-working persons due to adverse weather conditions compared to the same month in previous years, as well as an increase in the number of temporary layoffs. Additionally, the weekly releases of new unemployment insurance claims also show an upward trend in claims from the hurricane-affected areas.
Considering these circumstances, it is likely that the July employment statistics included temporary downward factors. In this critical juncture, determining the future course of monetary policy based on a mechanical rule may not be entirely appropriate. It remains to be seen whether the US economy will achieve a soft landing and whether the FRB will begin cutting interest rates.
