St. Louis Federal Reserve Bank Finds a Potential New Recession Indicator

When trying to identify or predict a recession in the US, economists typically reach for national data, which makes sense. The question they look to answer is how the country’s economy is doing. That’s led to a number of techniques, like the Sahm Rule, developed by former Fed economist Claudia Sahm in 2019: an empirical observation about unemployment, of when a recession has already started. Or a related type of calculation that Thomas Mertens, a vice president of economic research at the Federal Reserve Bank of San Francisco, recently shared, suggesting a way to identify that a recession was on its way.

Even more recently, researchers Kevin Kliesen and Cassandra Marks at the Federal Reserve Bank of St. Louis found another one, but this time not a view of national unemployment. Instead, the data is from the state level.