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Economic Outlook: Difference between revisions
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Is important to mention that even though leading indicators can provide a picture of the direction we can expect the economy to take in coming months, is not possible to derived from them the magnitude of the possible decline. But considering that some of numbers analized are at worst levels since years ago, the probability of being a serious contraction is higher than the alternative, especially with the FED narrative and actions to continue tightening while this contraction unfolds. | Is important to mention that even though leading indicators can provide a picture of the direction we can expect the economy to take in coming months, is not possible to derived from them the magnitude of the possible decline. But considering that some of numbers analized are at worst levels since years ago, the probability of being a serious contraction is higher than the alternative, especially with the FED narrative and actions to continue tightening while this contraction unfolds. | ||
Also, according to the Sahm<ref>https://fred.stlouisfed.org/release?rid=456#:~:text=The%20Sahm%20Rule%20identifies%20signals,time%20Sahm%20Rule%20Recession%20Indicator</ref>, the US economy will be on a recession when the unemployment rate hit 4.1%, the FED projections shows a unemployment rate already of 4.6%, level above the rule threshold, and not in line when their narrative of a soft landing possible. The Sahm rule also shows that when the unemployment rate rises 0.5% over the course of a year, it ends up rising by 2% or more, which means there is a probability the US economy could end up with levels of at least 6%. | Also, according to the Sahm<ref>https://fred.stlouisfed.org/release?rid=456#:~:text=The%20Sahm%20Rule%20identifies%20signals,time%20Sahm%20Rule%20Recession%20Indicator</ref>, the US economy will be on a recession when the unemployment rate hit 4.1%, the FED projections shows a unemployment rate already of 4.6%, level above the rule threshold, and not in line when their narrative of a soft landing possible. The Sahm rule also shows that when the unemployment rate rises 0.5% over the course of a year, it ends up rising by around 2% or more, which means there is a probability the US economy could end up with levels of at least 6%. | ||
6% Unemployment is in line with some analyst scenarios of 6-7% following the serious decline in housing activity the economy is experiencing, and even though is still a low level compare to other times in history, is the rate of change in the indicator that will determine how bad the recession will be, since the rate of change of the economy (GDP) will move according to the rate of change of the economic variables. | 6% Unemployment is in line with some analyst scenarios of 6-7% following the serious decline in housing activity the economy is experiencing, and even though is still a low level compare to other times in history, is the rate of change in the indicator that will determine how bad the recession will be, since the rate of change of the economy (GDP) will move according to the rate of change of the economic variables. | ||
== References == | == References == | ||