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Claims and recessions

Although J Powell said at Jackson Hole that "Evidence that the tightness in the labour market is no longer easing could also call for a monetary policy response”, the reality is that there are some areas in the US that are experiencing rising unemployment claims. The chart below compares current claims to an average of claims around recessions. Since history rhymes, we could see a scenario of rising unemployment, which let’s not forget it was the fed goal from the beggining, disguised under the sentence “kill demand”. The chart below suggests not only that unemployment may rise, but also that a recession is imminent, and that would be a surprise for the fed and the market, that has recently abandoned the idea of a hard landing for a paradigm where the #fed can hike as much as you want and the economy will not suffer. An alternative view is that the US economy has a lot of inertia thanks to zero interest rates for years, and it will take time for the brakes to slow it down. Next month’s claims are important to understand if we are indeed slowing down.

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