By Will Irving for the New Jersey State Policy Lab
In late July, the outlook for the U.S. economy appeared strong, with some observers suggesting that the Fed had indeed nailed the long-awaited soft-landing even in light of recent cooling in the labor market. Just a week later, however, markets panicked, albeit briefly, as the national jobs report for July showed monthly payroll employment growth slowing to 114,000 jobs, well short of the projected 175,000 job gain. Some invoked the “Sahm rule,” which uses a sharp(ish) increase in the average unemployment rate as a sign that the economy is in the early stages of recession, as the unemployment rate jumped to 4.3%, almost a full point higher than its low of 3.4% in April of 2023.