For those who don’t live and die by the BLS calendar, today was the monthly Friday for the jobs report. The unemployment rate is 3.9%, which is admittedly historically low, but its direction is a very strong indicator of when a recession is underway (frequently before it has been declared). I’m definitely not saying that we’re there yet, but recent data suggests that the unemployment rate bottomed out at roughly 3.5% earlier this year. While a steady trickle of unemployment up .1-.2% at a time may seem like no big deal. In aggregate, as the level moves higher away from 3.5%, the more likely we are to be entering recession. I think most of you believe this intuitively, but yes, equity returns and recessions are very correlated, hence the topic showing up on this site. Here’s a very impressive data plot regarding the relationship (for which I can take no credit).
Real-time Sahm Rule Recession Indicator (SAHMREALTIME) | FRED | St. Louis Fed (stlouisfed.org)
Have a great weekend!