US Faces Surprise Recession Risk As Unemployment Rate Jumps Unexpectedly, Top Economist David Rosenberg Warns

The U.S. economy might be on the brink of an unforeseen recession, according to a prominent economist, who has raised concerns about the recent spike in the unemployment rate.

What Happened: The unexpected rise in the unemployment rate, from 3.7% to 3.9% in February, has sparked fears of a potential recession. Economist David Rosenberg highlighted that this increase could disrupt the “soft landing narrative” and potentially lead to an unanticipated recession, reported Business Insider.

“Now that the jobless rate is up 0.5 of a percentage point from the January 2023 cycle low, it messes up the soft landing narrative because once it rises this much from the lows, the recession nobody ever sees coming arrives,” Rosenberg said in a Friday note.

Rosenberg referred to the Sahm Rule, created by economist Claudia Sahm, which suggests that a recession could be imminent when the national unemployment rate’s three-month moving average is 0.5 percentage points or more above its lowest point in the past year.

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Despite the Sahm Rule not being triggered, Rosenberg remains wary, pointing to other concerning factors in the jobs report. He noted negative revisions of 167,000 to the December and January payroll reports, indicating a stagnant job market. Additionally, while certain sectors like healthcare, government, and restaurants showed hiring strength, technology, and banking saw a rise in net layoffs.

Why It Matters: The warning of a potential recession comes amid other indicators of economic instability. A veteran technical analyst, Milton Berg, recently predicted a 60% market crash, citing long-standing concerns about the market’s stability. This warning was issued in the context of rising fears of an imminent recession.

Despite these warnings, the U.S. economy has been showing resilience in some areas. For instance, the U.S. has continued to be a major driver of global economic growth, although this position is being challenged by several factors, including domestic political divisions and global uncertainties.

Moreover, JPMorgan CEO Jamie Dimon has also expressed his concerns about the U.S. economy, warning of a potential recession and the market's underestimation of the risks. Despite this, he does not foresee any systemic issues.

A key recession indicator, the spread between the 10-year and three-month treasury yields, has been flashing for over a year, according to a note from DataTrek Research. This is a crucial sign of an impending recession.

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