The recent $2 trillion stock market crash and rising anxieties about a US recession have a new data point fueling the fire. A novel economic indicator suggests the US may have entered a recessionary state as early as March 2024, with a concerning 40% chance. This news comes amidst the ongoing challenge to the US dollar’s dominance by the BRICS bloc (Brazil, Russia, India, China, and South Africa).
New Indicator Points To A Possible Early Recession
Economists Pascal Michaillat and Emmanuel Saez developed this indicator based on the Sahm Rule, a recession-identifying tool created by Claudia Sahm. However, their version incorporates both unemployment data and job vacancy rates, offering a more comprehensive view. The indicator triggers a recession signal when the difference between the three-month moving average of unemployment and the vacancy rate hits 0.8 points. In July, this difference reached 0.5 points, suggesting a 40% chance of a recession already underway since March.
The indicator’s historical accuracy, dating back to the 1930s, compared to the Sahm Rule’s 1960s limitation, adds weight to its concerning implications. This news coincides with the BRICS bloc actively pushing for a de-dollarized global financial system, potentially weakening the US dollar’s grip.
Fears Mount as Stock Market Crashes and BRICS Rise
The Federal Reserve’s decision to maintain high interest rates has further fueled recession anxieties. While some financial institutions offer more optimistic outlooks, the recent stock market crash serves as a stark reminder of the market’s nervousness. The BRICS bloc’s stance further amplifies these concerns, raising questions about the future of the US dollar’s global dominance.
Looking Forward: Uncertainty and Potential for Change
Whether the indicator accurately reflects reality remains to be seen. However, it undeniably adds another layer of complexity to the already fragile US economic situation. With the Federal Reserve not expected to lower rates anytime soon, the immediate future might be bumpy. This period could be a turning point, prompting a critical re-evaluation of the US economic landscape, particularly in light of the BRICS bloc’s ambitions.
While the specter of recession looms large, it’s crucial to note that economic forecasts are inherently uncertain. Factors such as geopolitical tensions, consumer spending patterns, and corporate earnings could significantly impact the trajectory of the US economy. Additionally, the BRICS bloc’s push for de-dollarization is a long-term project, and its immediate impact on the US economy might be limited. As such, while the new indicator provides a concerning data point, it’s essential to approach it with caution and consider other economic indicators before drawing definitive conclusions.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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