Last week, Piper Sandler market strategists’ reliable recession indicator triggered, but they believe its triggering is bullish for stocks.
On Tuesday, Piper Sandler chief market strategist Michael Kantrowitz told MarketWatch that Friday’s Labour Department employment report had triggered his team’s “10% recession rule.”
Simply put, the rule activates when the three-month moving average of U.S. unemployment rises 10% from a year ago. It has traditionally predicted recessions.

Kantrowitz said this time that the rule’s triggering is more likely to signal a welcome slowdown for the U.S. economy than a recession.
He called it the latest sign that the U.S. labour market is returning to pre-pandemic levels. Kantrowitz noted that this would encourage the Federal Reserve to cut interest rates, which would boost stocks and bonds.
Stocks rose sharply after Friday’s April jobs data, supporting this interpretation. Bullish markets continued this week, with the S&P 500 SPX on track for its fourth straight gain.
In early afternoon trade on Tuesday, the S&P 500 rose 16 points, or 0.3%, to 5,197. The Nasdaq Composite COMP rose 35 points, or 0.2%, to 16,385, while the Dow Jones Industrial Average DJIA rose 73 points, or 0.2%, to 38,925.
After the jobs report, traders bet on multiple rate cuts before 2024, sending stocks up. Friday’s report showed that the unemployment rate rose to 3.9% last month and that the U.S. economy created 175,000 new jobs, missing economists’ expectations of over 200,000.
Job creation was cool, and wage growth slowed, which market strategists said could help lower inflation after it appeared to have stalled earlier this year.
Labour market indicators of a slowing economy are closely monitored by economists. The rise in unemployment in April brought the Sahm rule, named after former Fed economist Claudia Sahm, closer to triggering.
Once the three-month average of the unemployment rate rises 50 basis points or more relative to the lowest three-month moving-average level from the past year, the Sahm rule kicks in to warn of a recession before the National Bureau of Economic Research declares one.
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