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Sky News
06-06-2025
- Business
- Sky News
Trade war: US hiring slows but employment resilient
Why you can trust Sky News The US economy saw a slowdown in hiring but no leap in unemployment last month as the impact of Donald Trump's trade war continues to play out. Official data, which strips out the effects of seasonal workers, showed 139,000 net new jobs were created during May. Market analysts and economists had expected a figure of 130,000 - down on the 147,000 for April. The unemployment rate remained at 4.2% and hourly pay rates rose. The figures were released as the health of the US economy continues to attract close scrutiny amid continuing fears of a recession risk in the world's largest economy due to the effects of Donald Trump's trade war. Unlike most developed economies, such a downturn is not determined by two consecutive quarters of negative growth, but by a committee of respected economists. 5:08 It's known as the Business Cycle Dating Committee. It uses employment data, as well as official growth figures, to rule on the status of the economy. The threat of tariffs, and early salvoes of, the Trump administration's protectionist agenda were blamed for a sharp slowdown in growth over the first three months of the year. 4:02 Economists have found it hard to predict official data due to the on-off, and often chaotic, nature of tariff implementation. As such, all official figures are keenly awaited for news of the trade war's impact on the domestic economy. Other data this week showed a record 20% plunge in US imports during April. Next week sees the release of inflation figures - the best measure of whether import duty price increases are working their way through the supply chain and harming the spending power of businesses and consumers. It's a key piece of information for the US central bank. It has paused interest rate cuts, to the fury of the president, over trade war uncertainty. A forecast by the Paris-based OECD this week highlighted the chance of consumer price inflation rising above 4% later in the year. It currently stands at an annual rate of 2.3%. Fears of a US recession and trade war uncertainty have combined most recently with increasing market concerns about the sustainability of US debt, given Mr Trump's tax cut and spending plans. US stock markets are largely flat on the year while the dollar index, which measures the greenback against six other major currencies, is down 9% this year and on course for its worst annual performance since 2017. European stocks entered positive territory in a small nod to the employment data while US futures showed a similar trend. The dollar rose slightly. The reaction was likely muted because the data was well within expectations and seen as positive. Commenting on the figures Nicholas Hyett, investment manager at Wealth Club, said: "The US labour market has shrugged off the tariff uncertainty that rocked global stock and bond markets in April and May. "While the Federal government has continued to shed a small number of jobs, the wider economy has more than made up the difference, with the US adding slightly more jobs than expected in May. Wage growth also came in higher than expected - suggesting the economy is in rude health. "That will be taken as vindication by the Trump administration - which has been clear that the tariffs are aimed squarely at supporting Main Street rather than pleasing Wall Street. "Less positive from the White Houses' point of view is that a strong economy and rising wages gives the Federal Reserve less reason to cut interest rates - pushing yields a touch higher and making the fiscal splurge built into Trump's "Big Beautiful Bill" that bit more expensive.
The Hill
10-05-2025
- Business
- The Hill
Why the Federal Reserve risks falling behind the curve as recession fears rise
Hard data, which capture measurable performance of the economy but are backward-looking. Soft data are typically based on sentiment and expectations but are often forward-looking. .The disconnect between the two at this moment is creating challenges and generating data confusion among market participants and Federal Reserve officials. Even as households and firms turn increasingly pessimistic, the economic slowdown they fear hasn't yet fully materialized in the hard data. Gloomy sentiments do not always translate into actual spending or investment pullbacks. Advance estimate for the first quarter did show a contraction in the real GDP growth rate. However, the initial GDP growth rate estimate was significantly distorted by front-loading as importers raced to bring in foreign goods before Trump tariffs could fully take effect. As inventory adjustments take place in the second quarter, some of the first quarter distortions will dissipate. Yet, concerns remain as to whether bringing forward auto and other consumer goods purchases will leave American households and businesses with a hangover in the second quarter that may tilt the economy towards a recession. As the Trump administration's haphazard implementation of a poorly designed tariff structure unsettles financial markets and generates a spike in economic policy uncertainty indices, survey data suggests that American households are starting to fret about an economic slowdown and a revival of inflationary pressures. There has clearly been a sharp deterioration in the soft data and the hard data may soon start to catch up. Many wonder if we are inexorably heading towards a recession. In the U.S., the Business Cycle Dating Committee at the National Bureau of Economic Research officially designates the start and end dates of recessions and expansions. Unlike the oft-repeated media description of a recession as constituting two or more consecutive quarters of negative GDP growth, the bureau defines a recession as 'a significant decline in economic activity that is spread across the economy and that lasts more than a few months.' When determining cyclical turning points, the Business Cycle Dating Committee considers a broad set of measures, which include quarterly data (such as GDP and gross domestic income) as well as monthly data (such as real personal income less transfers, nonfarm payroll employment, real personal consumption expenditures and industrial production). The advantage of the definition of 'recession' cited above is that it is unlikely to be swayed by data quirks associated with preliminary GDP estimates that may ultimately get resolved in future revisions. For instance, the initially reported two consecutive quarters of negative GDP growth in the first half of 2022 was changed to just one quarter of negative print following data revisions. However, pronouncements of recession start dates can occur well after the downturn is underway — the determination that the Great Recession actually began in December 2007 was made in December 2008. In contrast, market participants and policymakers seek early indication of potential business cycle turning points. In fact, the holy grail of macroeconomic forecasting is to identify one or more recession indicators that will prove to be infallible and be able to offer a surefire signal of an impending economic downturn. Lamentably, in the post-pandemic era, prognosticators have been frequently confounded as many historically dependable indicators failed to deliver. Inverted yield curve, for instance, has a good historical track record of predicting U.S. recessions. Typically, the yield curve slopes upward since investors need to be compensated for taking on the risk of lending over a longer duration. However, prior to an impending downturn, yield curve inverts as investors come to believe that the monetary policy stance is too restrictive and thus likely to trigger an economic slowdown (which will ultimately force the Fed to cut policy rates). Despite its historical efficacy, yield curve inversions in the post-pandemic era have so far failed to correctly forecast a downturn. The yield spread between the 10-year T-note and the 3-month Treasury bill yield was negative between October 2022 and December 2024 (also, the yield differential between the 2-year and 10-year Treasury notes remained inverted for 25 months between July 2022 and August 2024). The yield curve usually does un-invert a few months prior to a recession. So, this indicator may still deliver, albeit belatedly. The so-called Sahm rule represents a statistical regularity — a recession is typically underway when the 3-month moving average of the unemployment rate rises by 0.5 percent or more above its low over the prior 12 months — that was first highlighted by former Fed economist Claudia Sahm. This indicator has also failed to deliver in recent months — the Sahm rule was triggered following the release of labor market data for July 2024 and yet the U.S. economy has remained resilient so far (4.2 percent unemployment rate in April 2025 was at the same level as in July 2024). Despite solid headline data, revisions to nonfarm payroll numbers, easing wage pressures, and a hiring pause suggest a cooling labor market. With traditional recession indicators misfiring, some suggest that online prediction markets like Polymarket or Kalshi may offer a more accurate pulse. Additionally, as Trump's trade war may generate supply-side bottlenecks, cargo traffic at major ports can help identify future economic vulnerabilities. Facing stagflation risk, and handicapped by data confusion and fallible recession indicators, the Fed has taken a wait-and-see approach and is willing to risk falling 'behind the curve.' Given the inherent lags associated with monetary policy, the danger is that delays in Fed action may turn out to be costly. Vivekanand Jayakumar, Ph.D., is an associate professor of economics at the University of Tampa.
Yahoo
03-05-2025
- Business
- Yahoo
Are we in a recession? Here are the umpires who make the final call
Recession fears are rising after first quarter GDP contracted for the first time in three years, but economists caution an official downturn may not be declared for months — or even years. While two consecutive quarters of negative GDP growth is often treated as a rule of thumb for a recession, it's not the official definition, and it doesn't always hold up. So, who decides? It's technically up to the Business Cycle Dating Committee (BCDC), a nongovernmental, nonpartisan entity tasked with identifying recessions. The BCDC operates under the National Bureau of Economic Research (NBER) and comprises a group of prominent economists. Led by Stanford professor and economist Valerie Ramey, the committee bases its determination on a broader set of indicators and only makes the call after reviewing months of backward-looking data. Like umpires calling a baseball game, the BCDC's job is to make an official call after the fact. That means we often don't know we're in a recession until it's already underway, or even over. "The NBER doesn't predict [recessions], they tell you after the fact," Michael Darda, chief economist and macro strategist at Roth Capital Partners, told Yahoo Finance. "The NBER is not trying to call a recession in advance. They wait until the data has been revised multiple times and the downturn is obvious." So, why does it matter when (or even whether) a recession is officially declared, especially if the call comes long after the pain has passed? For policymakers, investors, and historians, the timing of the call isn't just academic. It shapes the interpretation of economic cycles, informs the evaluation of policy decisions, and influences which lessons are carried into future downturns. Read more: 7 ways to recession-proof your savings According to the NBER website, a recession is a "significant decline in economic activity that is spread across the economy and that lasts more than a few months." To make that call, the NBER looks at several key indicators: employment, real personal income, industrial production, and real business sales. It also weighs three main criteria — depth, diffusion, and duration — when assessing a downturn. A particularly sharp drop in just one area can sometimes tip the scales, as it did during the COVID-induced recession of 2020, when a severe and widespread collapse in activity led the committee to declare a recession that lasted only two months. "It's not just two down quarters of GDP," Darda said. "That's a common misconception of what a recession is." Darda cited the 2020 recession as an "unusual" outlier. "It only lasted two months, but the drop was so steep and broad-based that it met the threshold," he explained. "The unemployment rate shot up from 3.5% to 15% in essentially two months. It was the shortest recession in history but also the deepest. Even during the Great Depression we didn't fall that much in any particular month." On the flip side, 2022 was an example of how relying on GDP alone can be misleading. "We had two down quarters of GDP and a down stock market," Darda said. "So, everybody thought, 'We're in a recession.' But as it turns out, there was no recession. One of those down GDP quarters was later revised slightly positive." Also in 2022, unemployment fell while job growth remained positive: "Right out of the gate, that tells you there's something wrong with calling a recession," he said. For a single indicator, Darda said the unemployment rate may be the most useful. In every recession on record, unemployment has risen by at least 200 basis points. Still, he emphasized that no single metric is definitive. Rather, it's the broader weight and totality of the data that truly matters. It's an important nuance as consensus views can easily become unanchored, especially following sharp stock market declines. Take 2022, for example: Fears of a looming recession surged largely in response to the stock market's volatile performance, with the S&P 500 (^GSPC) dropping 25% between January and October. While the stock market is often viewed as a forward-looking indicator, history shows that not every downturn in equities signals an economic recession. Notable declines in 1987, 2011, and late 2018 all occurred without a subsequent recession. That's why the NBER does not consider stock market performance in its determinations. It also avoids softer survey-based indicators such as consumer confidence, which recently reflected rising inflation expectations and a more pessimistic labor outlook amid trade-related uncertainties. Read more: How to recession-proof your house "In periods of disruption, the data can get very noisy," Claudia Sahm, former Federal Reserve board economist and chief economist at New Century Advisors, told Yahoo Finance. She pointed to the most recent negative GDP reading as an example, noting, "In all likelihood, GDP is going to snap back in the second quarter because when we look under the hood, it was this front-running of the tariffs to increase imports and spending ahead of time. That demand was borrowed from the future." That's why the NBER prefers to wait before making the official call. But for businesses and policymakers, delaying action until after the fact isn't realistic. Monitoring a broad set of real-time indicators can help cut through the noise and guide more timely decisions. That's where the Sahm Rule comes in. Developed by Claudia Sahm, the rule is a real-time signal that a recession has likely begun, aimed at prompting swift fiscal responses like stimulus checks or enhanced unemployment benefits. While it's not meant to forecast downturns, the Sahm Rule helps flag early shifts in the labor market. The rule was briefly triggered in 2022 (and again in 2024), reflecting a modest rise in unemployment, but no recession followed — highlighting both its usefulness as an early warning tool and its limitations amid unusual economic conditions. Sahm cautioned that recessions are hard to predict and are often driven by unexpected shocks. For now, signs like modest hiring slowdowns and reduced hours suggest a potential downturn may not fully materialize until later in the year as cost pressures from tariffs and delayed layoffs gradually show up in the data. Read more: The latest news and updates on Trump's tariffs Michael Pearce, deputy chief US economist at Oxford Economics, added, "A lot of so-called foolproof recession indicators have broken down in recent years, and I think that points to a very important lesson, which is that we don't have a very long history of data to work with." "Recessions are infrequent and come from different causes, so there doesn't seem to be any foolproof indicator." On top of that, Pearce said the structure of the economy has changed. Manufacturing is smaller, services dominate, and that makes typical business cycle signals harder to read. "We've said the odds of recession are elevated but less than 50%," he said. "If it's a more marginal case — [an economy] bouncing around zero— it's going to be a lot harder to call a recession in real time." We'll find out for sure when the NBER umpires make the call. Alexandra Canal is a Senior Reporter at Yahoo Finance. 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Los Angeles Times
12-04-2025
- Business
- Los Angeles Times
What's a dead cat bounce? Six terms to know for the trade war
NEW YORK — Bulls, bears and dead cats are lurking in the background of President Donald Trump's trade war. As the effects of the administration's latest tariffs unfold, news consumers may confront unfamiliar terms related to investments or financial markets. Here is a guide to some of the most common words: A bear market is a term used by Wall Street when an index such as the S&P 500 or the Dow Jones Industrial Average has fallen 20% or more from a recent high for a sustained period of time. Why use a bear to refer to a market slump? Bears hibernate, so they represent a stock market in retreat. In contrast, Wall Street's nickname for a surging market is a bull market, because bulls charge. When stocks rebound briefly in a moment of free fall or uncertainty, it's known as a 'dead cat bounce.' That's from the notion that even a dead cat will bounce when it falls from a great enough height. The market recovery tends to be temporary and brief, and the downturn tends to resume. Capitulation refers to the point when investors give up on the idea of recouping their losses and sell, often out of fear and intolerance of falling prices. This tends to happen during times of low confidence and high uncertainty and volatility. Capitulation can sometimes indicate the bottom of a market, but it's easier to identify in retrospect. A recession is a time when the economy shrinks and unemployment rises. Recessions are officially declared by the obscure-sounding National Bureau of Economic Research, a group of economists who consider factors such as hiring trends, income levels, spending, retail sales and factory output. The bureau's Business Cycle Dating Committee defines a recession as 'a significant decline in economic activity that is spread across the economy and lasts more than a few months.' The organization typically does not declare a recession until well after one has begun, sometimes as long as a year later. In the days before Trump's most recent tariffs took effect, economists at Goldman Sachs raised their assessment of the odds the U.S. will experience a recession from 35% to as high as 65%, but the analysts rescinded that forecast Wednesday after his administration announced a 90-day pause on most of the levees. 'Buying the dip' refers to purchasing a stock or buying into the market right after it has lost value, at a discount. The phrase is commonly used by retail investors. Unfortunately, it's all but impossible to time the market, to know where the bottom will be or how long a recovery will take. The 10-year Treasury bond yield is the interest rate the U.S. government pays to borrow money for a decade. It's a key indicator of investor sentiment and economic conditions, and it helps set prices for all kinds of other loans and investments. The yield influences borrowing costs and signals expectations about inflation and economic growth. Historically, Treasury bonds are considered one of the world's safest assets. That means investors often buy them when there's uncertainty in the market, which tends to lower the yield. Prices for the 10-year bonds tend to fall when confidence is high (and people buy assets perceived as riskier), which causes yields to rise. In recent days, however, investors have sold Treasury bonds, which has sent the benchmark 10-year yield up. That could point to a lack of consumer confidence in Treasury bonds themselves, or any number of other factors. Lewis writes for the Associated Press.
Yahoo
10-04-2025
- Business
- Yahoo
A dead cat bounce? Six market terms to know in an era of trade wars
Bulls, bears and dead cats are lurking in the background of President Donald Trump's trade war. As the effects of the administration's latest tariffs unfold, news consumers may confront unfamiliar terms related to investments or financial markets. Here is a guide to some of the most common words. A bear market is a term used by Wall Street when an index such as the S&P 500 or the Dow Jones Industrial Average has fallen 20% or more from a recent high for a sustained period of time. Why use a bear to refer to a market slump? Bears hibernate, so they represent a stock market in retreat. In contrast, Wall Street's nickname for a surging market is a bull market, because bulls charge. When stocks rebound briefly in a moment of free fall or uncertainty, it's known as a 'dead cat bounce'. That's linked to the idea that even a dead cat will bounce when it falls from a great enough height. The market recovery tends to be temporary and brief, and the downturn tends to resume. Capitulation refers to the point when investors give up on the idea of recouping their losses and sell, often out of fear and intolerance of falling prices. This tends to happen during times of low confidence, high uncertainty and volatility. Capitulation can sometimes indicate the bottom of a market, but it's easier to identify in retrospect. Related European markets eye historic rally following Trump's tariff pause Why are US Treasury bonds losing their safe-haven status in dramatic sell-off? A recession is a time when the economy shrinks and unemployment rises. Recessions are officially declared by the National Bureau of Economic Research, a group of economists who consider factors such as hiring trends, income levels, spending, retail sales and factory output. The bureau's Business Cycle Dating Committee defines a recession as 'a significant decline in economic activity that is spread across the economy and lasts more than a few months'. The organisation typically does not declare a recession until well after one has begun, sometimes as long as a year later. In the days before Trump's most recent tariffs took effect, economists at Goldman Sachs raised their assessment of the odds the US will experience a recession from 35% to as high as 65%. Analysts rescinded that forecast on Wednesday after his administration announced a 90-day pause on most of the levies. 'Buying the dip' refers to purchasing a stock or buying into the market right after it has lost value, at a discount. The phrase is commonly used by retail investors. Unfortunately, it's all but impossible to time the market, to know where the bottom will be, or how long a recovery will take. The 10-year Treasury bond yield is the interest rate the US government pays to borrow money for a decade. It's a key indicator of investor sentiment and economic conditions, and it helps set prices for all kinds of other loans and investments. The yield influences borrowing costs and signals expectations about inflation and economic growth. Historically, Treasury bonds are considered one of the world's safest assets. That means investors often buy them when there's uncertainty in the market, which tends to lower the yield. Prices for the 10-year bonds tend to fall when confidence is high (and people buy assets perceived as riskier), which causes yields to rise. In recent days, however, investors have sold Treasury bonds, which sent the benchmark 10-year yield up. That could point to a lack of consumer confidence in Treasury bonds themselves.
