Friday, May 9, 2025

Latest

Does The Unemployment Rate Suggest The US Is In A Recession?

Are we in a recession?

From a technical perspective, the answer quite simply at this moment in time, is no. That answer is based on the fact that the widely accepted determination for whether a recession is occurring, is two consecutive quarters of negative economic growth, as measured by GDP.

For our Canadian viewers, we have yet to experience a quarter of negative economic growth, although we are getting there – Q1 2022 registered GDP growth of just 0.8% in Canada, which annualizes to 3.1%. Analysts meanwhile had anticipated an annualized figure of 5%.

Flash estimates for April however, did show that the economy shrank by 0.2% at the start of the second quarter, as highlighted by TD Canada Trust in an analyst note published yesterday.

For those to the south of the Great White North, for which must of the western world looks to for guidance on where the global economy is headed, things seem to be bit more advanced in the cycle. For Q1 2022, the US economy was estimated to have shrank by an estimated 1.4% in an advance estimate issued April 28, put forth by the US Bureau of Economic Analysis, which exists under the US Department of Commerce. The second estimate, put forth just six days ago on May 26, meanwhile increased that estimated decline to 1.5%.

In simple terms, this means that we are half way to officially declaring the current economic environment as being in a recession, at least for the US economy. With it now being June, we are roughly two months away from receiving the final confirmation to determine this, at least based on advance estimates.

There are, however, other means of indicating whether or not we are headed for such an economic situation. Armchair analysts highlight various leading and lagging indicators galore to make an argument on the matter.

And with that, it brings us to the chart of the day – US real GDP growth versus that of the unemployment rate. While many point to the strong jobs market as an indication that the economy is performing strongly, this indicator, to the surprise of even much of our own staff, is a lagging indicator. In fact, the strongest job markets tend to exist at the start of such recessions.

Why is this important in the current environment?

The significance is that the unemployment rate in the US is at multi-year lows, with both March and April 2022 data pointing to an unemployment rate of just 3.60%, which is comparable to the pre-pandemic lows of 3.50% experienced in January and February 2020.

This, amid a first quarter 2022 decline of 1.5% in real GDP terms, suggests that perhaps history is repeating itself once again.


Information for this briefing was found via IconEcon, TradingEconomics, and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

Leave a Reply

Video Articles

Endeavour Mining Q1 Earnings: Cash Flow Is King

G Mining Oko West Feasibility: Move Fast, Break.. Nothing?

New Gold Q1 Earnings: What’s Behind The Market’s Surprising Reaction?

Recommended

First Majestic Posts Record Cash Flows In Q1 As Production Costs Fall

Brazil Potash Secures Funding In Support Of US$2.5 Billion Autozales Project

Related News

UK Economy Contracts by Most on Record, GDP Down by 20.1% in Q2

It appears that the UK has bogged down after spinning its tires endlessly in the...

Wednesday, August 12, 2020, 11:46:47 AM

What Recession? US Unemployment Rate Falls to 3.5%, Cements Case for Further Rate Hikes

The US labour market remained resilient in September, as businesses continued their hiring spree despite...

Friday, October 7, 2022, 11:46:24 AM

Interest Rate Aftermath: Canada’s Economy Unexpectedly Contracts in Second Quarter

Canada’s real GDP in the second quarter remained largely stagnant, showcasing the tangible impact of...

Sunday, September 3, 2023, 01:49:00 PM

Jerome Powell Hikes Rates 75 Basis Points, Doesn’t Believe Economy Is In A Recession

The Federal Reserve on Wednesday delivered on a much-anticipated 75 basis-point rate hike, whilst acknowledging...

Wednesday, July 27, 2022, 04:58:00 PM

More Pain Coming: Fed Isn’t Going to Cut Rates Until 2024

As widely expected, the Fed hiked rates half a percentage point on Wednesday, bringing the...

Wednesday, December 14, 2022, 04:31:11 PM