London Daily

Focus on the big picture.
Saturday, Jun 21, 2025

New Fed research flags rising risk of U.S. recession

New Fed research flags rising risk of U.S. recession

Just over half of the 50 U.S. states are exhibiting signs of slowing economic activity, breaching a key threshold that often signals a recession is in the offing, new research from the St. Louis Federal Reserve Bank report said.
That report, released Wednesday, followed another report from the San Francisco Fed from earlier in the week that also delved into the rising prospect that the U.S. economy may fall into recession at some point in coming months.

The St. Louis Fed said in its report that if 26 states have falling activity within their borders, that offers “reasonable confidence” that the nation as a whole will fall into a recession.

Right now, the bank said that as measured by Philadelphia Fed data tracking the performance of individual states, 27 had declining activity in October. That’s enough to point to a looming downturn while standing short of the numbers that have been seen ahead of some other recessions. The authors noted that 35 states suffered declines ahead of the short and sharp recession seen in the spring of 2020, for example.

Meanwhile, a San Francisco Fed report, released Tuesday, observed that changes in the unemployment rate can also signal a downturn is on the way, in a signal that offers more near-term predictive value than the closely-watched bond market yield curve.

The paper’s authors said that the unemployment rate bottoms out and begins to move higher ahead of recession in a highly reliable pattern. When this shift occurs the unemployment rate is signaling the onset of recession in about eight months, the paper said.

The paper acknowledged its findings are akin to those of the Sahm Rule, named for former Fed economist Claudia Sahm, who pioneered work linking a rise in the jobless rate to economic downturns. The San Francisco Fed research, written by bank economist Thomas Mertens, said its innovation is to make the jobless rate change a forward-looking indicator.

Unlike the St. Louis Fed state data that is tipping toward a recession projection, the U.S. jobless rate has thus far remained fairly stable, and after bottoming at 3.5% in September, it held at 3.7% in both October and November.

The San Francisco Fed paper noted that the Fed, as of its December forecasts, sees the unemployment rate rising next year amid its campaign of aggressive rate hikes aimed at cooling high levels of inflation. In 2023, the Fed sees the jobless rate jumping up to 4.6% in a year where it sees only modest levels of overall growth.

If the Fed’s forecast comes to pass, “such an increase would trigger a recession prediction based on the unemployment rate,” the paper said. “Under this view, low unemployment can lead to a heightened probability of recession when the unemployment rate is expected to rise.”

Tim Duy, chief economist with SGH Macro Advisors, said he believes that to achieve what the Fed wants on the inflation front, the economy would likely “lose roughly two million jobs, which would be a recession like 1991 or 2001.”

Anxiety over the prospect of the economy falling into recession has been driven by the Fed's forceful actions on inflation. Many critics contend that the central bank is focusing too much on inflation and not enough on keeping Americans employed. Central bank officials have countered that without a return to price stability, the economy will struggle to meet its full potential.

What's more, in the press conference following the most recent Federal Open Market Committee meeting earlier this month, central bank leader Jerome Powell said that he didn’t view the current Fed outlook as a recession prediction given the expectation growth will remain positive. But he added much remains uncertain.

“I don’t think anyone knows whether we’re going to have a recession or not and, if we do, whether it’s going to be a deep one or not. It’s just, it’s not knowable,” Powell said.
Newsletter

Related Articles

0:00
0:00
Close
Political Turmoil Resurfaces in Belgium Amid Economic Concerns
Fed policymakers divided on timing of interest rate cuts
Trump signals imminent agreement with Harvard University
Inheritance tax referendum alarms Swiss billionaire community
Japan cancels bilateral security meeting amid US defence demands
AI skeptic Emily Bender warns that ‘the emperor has no clothes’
Israel Confirms Assassination of Quds Force Commander in Tehran
16 Billion Login Credentials Leaked in Unprecedented Cybersecurity Breach
Senate hearing on who was 'really running' Biden White House kicks off
Iranian Military Officers Reportedly Seek Contact with Reza Pahlavi, Signal Intent to Defect
FBI and Senate Investigate Allegations of Chinese Plot to Influence the 2020 Election in Biden’s Favor Using Fake U.S. Driver’s Licenses
Vietnam Emerges as Luxury Yacht Destination for Ultra‑Rich
Plans to Sell Dutch Embassy in Bangkok Face Local Opposition
China's Iranian Oil Imports Face Disruption Amid Escalating Middle East Tensions
Trump's $5 Million 'Trump Card' Visa Program Draws Nearly 70,000 Applicants
DGCA Finds No Major Safety Concerns in Air India's Boeing 787 Fleet
Airlines Reroute Flights Amid Expanding Middle East Conflict Zones
Elon Musk's xAI Seeks $9.3 Billion in Funding Amid AI Expansion
Trump Demands Iran's Unconditional Surrender Amid Escalating Conflict
Israeli Airstrike Targets Iranian State TV in Central Tehran
President Trump is leaving the G7 summit early and has ordered the National Security Council to the Situation Room
Taiwan Imposes Export Ban on Chips to Huawei and SMIC
Israel has just announced plans to strike Tehran again, and in response, Trump has urged people to evacuate
Netanyahu Signals Potential Regime Change in Iran
Juncker Criticizes EU Inaction on Trump Tariffs
EU Proposes Ban on New Russian Gas Contracts
Analysts Warn Iran May Resort to Unconventional Warfare
Iranian Regime Faces Existential Threat Amid Conflict
Energy Infrastructure Becomes War Zone in Middle East
UK Home Secretary Apologizes Over Child Grooming Failures
Trump Organization Launches 5G Mobile Network and Golden Handset
Towcester Hosts 2025 English Greyhound Derby Amid Industry Scrutiny
Gary Oldman and David Beckham Knighted in King's Birthday Honours
Over 30,000 Lightning Strikes Recorded Across UK During Overnight Storms
Princess of Wales Returns to Public Duties at Trooping the Colour
Red Arrows Use Sustainable Fuel in Historic Trooping the Colour Flypast
Former Welsh First Minister Addresses Unionist Concerns Over Irish Language
Iran Signals Openness to Nuclear Negotiations Amid Ongoing Regional Tensions
France Bars Israeli Arms Companies from Paris Defense Expo
King Charles Leads Tribute to Air India Crash Victims at Trooping the Colour
Jack Pitchford Embarks on 200-Mile Walk to Support Stem Cell Charity
Surrey Hikers Take on Challenge of Climbing 11 Peaks in a Single Day
UK Deploys RAF Jets to Middle East Amid Israel-Iran Tensions
Two Skydivers Die in 'Tragic Accident' at Devon Airfield
Sainsbury's and Morrisons Accused of Displaying Prohibited Tobacco Ads
UK Launches National Inquiry into Grooming Gangs
Families Seek Closure After Air India Crash
Gold Emerges as Global Safe Haven Amid Uncertainty
Trump Reports $57 Million Earnings from Crypto Venture
Trump's Military Parade Sparks Concerns Over Authoritarianism
×