Recession signs are flashing in all but six states as the Trump administration’s policies threaten to throttle growth, a recent analysis found.
The unemployment rate in 44 states has jumped by at least 0.5 percentage points between this economic cycle’s low and January, Rosenberg Research said in a recent note.
The only six states not to see an increase of that magnitude are Connecticut, Delaware, Montana, North Carolina, Oklahoma, and South Dakota, according to a table provided to Business Insider by the firm.
“The breadth of the increase we have seen in the unemployment rate means recession pressures are broadening out regionally,” founder and president David Rosenberg told BI, adding that “88% of the country has a labor market blanketed” in recession.
The metric used by Rosenberg’s firm is an iteration of the “Sahm rule,” which says that when the three-month moving average of the unemployment rate rises by 0.5 percentage points or more from its lowest point in the previous 12 months, a recession reliably follows.
Rosenberg, who called the Great Recession when he was the chief North American economist at Merrill Lynch, warned that a combination of tariff-fueled price increases and an easing labor market could put a “serious squeeze” on incomes and reduce consumer spending.
He also underscored that Trump’s efforts to curtail public outlays and shrink the federal government are a “huge shift” from the massive stimulus of recent years.
Negative implications
“Elon Musk is turning that prior stimulus into restraint long before any tax cuts get passed into law,” Rosenberg told BI, referring to the Tesla and SpaceX CEO’s efforts to ostensibly cut government fraud and waste with his DOGE agency.
“The implications for asset prices, both equities and residential real estate, are decisively negative.”
David Wigglesworth, an economist and data scientist at Piper Sandler, told BI the number of states triggering the traditional Sahm rule dropped from 24 in July to 18 in January, but that tally was still elevated compared with historical norms.
“With short-term labor risks building — from the roll-off of federal Covid grants to states, to DOGE firings, tariffs, elevated general uncertainty, etc. — we may not see it improve much further,” he said.
Wigglesworth hailed Rosenberg’s measure as “handy” but emphasized it’s “much more forward-looking than the Sahm rule, which relies on three-month averages and a trailing 12-month window.” Those constraints might help the more conventional measure to avoid noise in the data caused by monthly swings, as well as older cycle lows.
National unemployment has hovered between 3.4% and 4.2% since January 2022, but inched up to 4.1% last month. State-level unemployment data for February is due on Friday.
A BI analysis of official jobs data found that unemployment rose in all but seven states in the year to January, and was flat in a further two. A full 28 states saw joblessness rise by at least 0.5 percentage points from historical lows set since the start of 2022, the analysis found.
For example, Rhode Island’s unemployment rate rose from 2.6% in June 2023 to 4.6% in January this year. Similarly, California’s rate jumped from 3.8% in August 2022 to 5.4% in January.
It’s worth noting that state-level unemployment spiked last year yet a national downturn didn’t follow. Rosenberg has also been predicting a recession for several years and has yet to be proven right.
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