Could recession be imminent? U3 is 50bps above its lowest 12m value!

One of the popular indicators of an upcoming recession may be an increase in the unemployment rate (U3) above the 12-month moving average - see Figure 1.

U3 is currently 50bps above the cycle low and 22bps above its 12m average!

More details in Figure 2.

Below details per first month of recession:

Feb-2024: U3 = 4.90% (12m av. = 3.68%)

Feb-2020 (recession begins): U3 = 3.50% (12m av. = 3.62%)

Dec-2007 (recession begins): U3 = 5.00% (12m av. = 4.62%)

Mar-2001 (recession begins): U3 = 4.30% (12m av. = 4.02%)

Jul-1990 (recession begins): U3 = 5.50% (12m av. = 5.33%)

Mar-1981 (recession begins): U3 = 7.40% (12m av. = 7.46%)

Jan-1980 (recession begins): U3 = 6.30% (12m av. = 5.88%)

Nov-1973 (recession begins): U3 = 4.80% (12m av. = 4.88%)

Dec-1969 (recession begins): U3 = 3.50% (12m av. = 3.49%)

Apr-1960 (recession begins): U3 = 5.20% (12m av. = 5.27%)

Even if the 12m average was above U3 in the first month of the recession, U3 increased significantly within a few months... giving a strong signal of a recession (as in the case of 1990, 1981, 1980, 1973, 1969, 1960).

A second approach could be to check the history for a U3 increase of 50bps above its lowest value in the last 12 months.

Interestingly, it is rare for U3 to be 50 bps above preceding 12-month low outside of a recession - see Figure 3.