Our Next monthly household survey , for November, will be out before long. This is on the heels of a longer dent in data collection due to a recent federal government shutdown. This miscalculation has huge consequences for understanding the strength of the U.S. labor market. In particular, we won’t have the October unemployment rate numbers. Both of these moves have analysts looking to closely. When signs of rising unemployment appear, they’re often an indication that a recession is already on the horizon.
The U.S. unemployment rate is expected to increase, reaching 4.5% to 4.6%. Such a dramatic increase is troubling in light of the SAHM recession indicator, as it may be triggered at any moment. This indicator is activated when the three-month moving average of the unemployment rate surpasses 0.5 percentage points above the lowest point recorded in the past year.
Implications of Unemployment Rate Changes
The expected increase in unemployment isn’t just a figure on the page, it has deeper economic consequences. Perhaps this is why an increase to 4.5% or 4.6% is portrayed as evidence of labor market overheating. This increased strain may result in less consumer spending and decreased economic growth. The SAHM recession indicator is meant to be an early warning system, helping economists and policymakers stay one step ahead of recessions.
As the Bureau of Labor Statistics prepares to release the full November report alongside the missing October payroll data, economists will scrutinize these figures for clues about the economy’s health. Broadly, analysts are lowering expectations for October and November’s job growth, with many settling around 50,000. This appears to be a clear indication of a large deceleration in hiring.
Slowdown in Economic Activity
Recent economic indicators paint a picture of that deceleration in overall activity. That’s the good news. Despite the headline draw of new business index composite output index having dropped to 58.9 from 59.7, growth is clearly moderating in all sectors. The other services sector shows this trend with the pace of activity cooling to 59.1 from 59.8. Conversely, manufacturing output dropped from 59.6 to 58.4.
These numbers read like an alarm bell that the economy is losing steam, triggering alarms over the potential for continued economic expansion. And while input costs have climbed steeply, they’re still just above the almost five-and-a-half-year low hit in November. This confluence of slowing economic activity and increasing inflationary pressure is a double-whammy to the prosperity of businesses and consumers.
International Perspectives and Currency Trends
Internationally, tremendous upheaval is taking place which has the potential to greatly affect economic conditions here in the U.S. Otherwise, National Bank of Poland policymakers, including Henryk Wnorowski, have made largely dovish noises about future policy. Wnorowski calls it “extremely improbable” for the policy rate to drop under 3%. Other NBP members have had their say, too, most notably with Glapinski himself submitting his recommendations. They think we will find the bottom of the easing cycle a little higher, in the 3.5% range.
In India, the boom times are over. Despite the output levels continuing to increase, the rate of growth has fallen to a ten-month low according to the December PMI surveys. The Indian rupee has recently hit an all-time low against the dollar. It has now broken through the major 91 level on the USD/INR cross rate.