"With last week’s dismal GDP report, and Monday’s disappointing manufacturing purchasing-managers report, the odds of the U.S. reentering recession are rising. The dividing line between a double-dip and a renewed recovery will be drawn by the job market.
Goldman Sachs economists have come up with a rule of thumb to determine if the economy has entered recession: If the three month average of the unemployment rate increases by more than 0.35 percentage points, the economy will enter recession within the next six months. Stripping out months when the economy is already in recession, or has recently exited one, the measure has proved accurate about two-thirds of the time.
“The important take away from this historical pattern is simple: the labor market is pivotal to sustained growth,” writes Goldman’s Andrew Tilton. “When economic activity slows enough to push the unemployment rate higher for more than a short period, household income growth is interrupted. This typically leads to a pullback in consumer spending, and companies respond with further cuts in labor demand.”..."
at http://blogs.wsj.com/economics/2011/08/02/goldman-rising-unemployment-rate-raises-recession-risk/?mod=WSJBlog
Goldman Sachs economists have come up with a rule of thumb to determine if the economy has entered recession: If the three month average of the unemployment rate increases by more than 0.35 percentage points, the economy will enter recession within the next six months. Stripping out months when the economy is already in recession, or has recently exited one, the measure has proved accurate about two-thirds of the time.
“The important take away from this historical pattern is simple: the labor market is pivotal to sustained growth,” writes Goldman’s Andrew Tilton. “When economic activity slows enough to push the unemployment rate higher for more than a short period, household income growth is interrupted. This typically leads to a pullback in consumer spending, and companies respond with further cuts in labor demand.”..."
at http://blogs.wsj.com/economics/2011/08/02/goldman-rising-unemployment-rate-raises-recession-risk/?mod=WSJBlog
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