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How to Tell if a Recession is Coming – A measure that focuses on the unemployment rate

Experts from the Hamilton Project observe that two traditional methods of noting when recessions have started—waiting for an announcement from the National Bureau of Economic Research or observing GDP to decline over two consecutive quarters—“are appropriate for historical analysis but too slow to be useful for policy.” Instead, they explain a measure developed by economist Claudia Sahm that focuses on the unemployment rate’s three month moving average. “This approach,” they write, “is appropriate because … the indicator has both correctly signaled a recession 4–5 months following the beginning of the recession and has virtually never called a recession incorrectly since 1970.”

Chosen excerpts by Job Market Monitor. Read the whole story at Charts of the Week: Recessions

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