Is a zombie recession coming?

(By that, we mean that renewed fears of a
“hard landing” recession have emerged from the grave and are walking
among us.)1

Many analysts were convinced that the U.S. economy
could achieve a coveted “soft landing,” but they might be overly optimistic.

Want to skip the economics? Scroll to the bottom
for the big-picture takeaway.

What makes some economists worry about a
recession?

Some of the latest concerns are centered around the
labor market.

The latest report showed that just 175k jobs were
added in April, far below March’s blockbuster number of 315k, and under what
analysts were expecting for the month.2

Jobs numbers from prior months have also been
revised downward, indicating softness.

The jobs market has been a mainstay of the strong
economy, so weakness could spell trouble.

However, there are two things to keep in mind:

1. Signs of a slowing jobs market may help the
Federal Reserve regain confidence that inflation will eventually drop to their
2% target, and open up a path to cutting interest rates.

2. Trends matter more than a single weak report, so
we’ll keep watching the data.

Other warning signals are also flashing.

One is the “Sahm Rule” indicator that tracks
movement of the unemployment rate to predict recessions.3

When the 3-month moving average of the unemployment
rate spikes 0.5% above its 12-month low, it has historically shown that the
U.S. is in the early stages of a recession.