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Weekly global economic update

What’s happening this week in economics? Deloitte’s team of economists examines news and trends from around the world.

  • There is an indicator called the “Sahm Rule,” named after Federal Reserve economist Claudia Sahm. In 2019, she sought a reliable indicator as to whether a recession had begun to determine when offsetting government benefits should begin. There have been nine recessions in the United States since 1960 and her rule works in every instance. The rule says that, if the three-month moving average unemployment rate is more than 50 basis points above its low in the preceding 12 months, then a recession has begun. For the rule to apply now, the unemployment rate would have to rise from 3.6% in May to 5.1% in June—which is unlikely. Thus, it seems likely that we’re not yet in recession—at least based on this rule. 
  • Another rule of thumb concerns the yield curve. Consider the gap between the yield on the 10-year government bond and the two-year bond. In every US recession in the last 45 years, this spread (or yield curve) inverted (meaning the two-year yield exceeded the 10-year yield) either at the start of recession or not long before. There is currently no inversion, although there was for a few days in April. More notably, the gap between the yield on the 10-year bond and the three-month Treasury note is a very reliable indicator. In each of the recessions of the last 45 years, this gap inverted substantially, usually about a year prior to the next recession. This measure currently remains well above zero, not even close to inversion. Based on this indicator, a recession does not appear to be imminent.
  • Several indicators of consumer spending on services suggest continued strength. These include the daily number of people passing through airport security checkpoints (continuing to rise, although slightly below the prepandemic level), weekly ticket sales at movie theatres (above the prepandemic level), and the weekly hotel occupancy rate (rising but slightly below the 2019 level). Thus, consumers do not yet appear to be backing away from services. In fact, quite the opposite. Indeed, as spending on goods declines, many consumers are switching back to the services they abandoned during the pandemic. This is not suggestive of recessionary conditions. 
  • On the other hand, the critically important housing industry is now showing signs of stress, likely due, in part, to the tightening of monetary policy that has boosted the average mortgage interest rate significantly. Housing inventory has increased sharply in recent weeks, evidently due to declining demand. Showing of homes for sale are down, and housing starts fell sharply in May (although the number of homes currently under construction is at a record high). Trouble in the housing market is often a sign of a deteriorating economy.  

The outward evidence does not suggest that the United States is in recession or faces imminent recession. But strange things can happen, and recession this year cannot be precluded. Moreover, as has been noted, economists rarely know a recession has begun until well into or even after that recession. Meanwhile, there are things happening now that can cause a recession. For example, surveys indicate a growing fear of recession on the part of businesses, which could cause many to stop hiring and cancel investment spending. Consumers are clearly stricken by higher gasoline prices, which, at the least, will mean a sharp decline in spending on other things. Moreover, risk remains of further disruption, most likely due to events in Russia and Ukraine. Thus, the risk of imminent recession cannot be dismissed entirely. 


Deloitte Global Economist Network


The Deloitte Global Economist Network is a diverse group of economists that produce relevant, interesting and thought-provoking content for external and internal audiences. The Network’s industry and economics expertise allows us to bring sophisticated analysis to complex industry-based questions. Publications range from in-depth reports and thought leadership examining critical issues to executive briefs aimed at keeping Deloitte’s top management and partners abreast of topical issues.

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Cover image by: Sylvia Chang

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