About 19% of the 390 largest U.S. metro areas — where 24% of U.S. workers are located — have experienced an increase in the local unemployment rate by at least 0.5 percentage points in the past year, according to a Sept. 5 report from Glassdoor.
Based on a commonly referenced guide, called the Sahm Rule, forecasters may be able to predict a potential recession when the national unemployment rate increases by 0.5 percentage points or more from its 12-month low. Some metro areas, including major tech industry hubs such as San Francisco and San Jose in California, and Austin, Texas, have passed this threshold in recent months.
“While a rapid increase in the share of metro areas meeting the criteria of a Sahm-Rule Recession is unusual, it is not unprecedented,” the Glassdoor’s economic research team wrote. “It also increased to a similar peak before retreating during the 1994-95 ‘soft landing’ when the Federal Reserve managed to increase interest rates without sparking a broader recession.”
Nationally, the unemployment rate increased from 3.5% in July to 3.8% in August. It’s now up 0.4 percentage points from the historic lows reported earlier this year in January and April.
In tech industry metro areas, the increase has been much higher, Glassdoor recently reported. The unemployment rate increased by 0.7 percentage points to 3.4% in San Francisco, 0.9 percentage points to 3.4% in San Jose and 0.7 percentage points to 3.5% in Austin over the past year.
However, other tech-focused metros have maintained a low or steady rate. In Seattle and Denver, for instance, the unemployment rate has increased only slightly or stayed low.
Generally, job cuts slowed during the summer, although cost-cutting measures continued in the tech industry. Some sectors may continue to announce cuts in future months, but it’s possible that the job losses predicted earlier this year due to inflation and high interest rates may not happen, one Challenger, Gray & Christmas executive said in a July statement.
At the same time, worker turnover and hiring trends appeared to slow as well, according to a recent Workday report. On the platform, job requisitions dropped, more applications came in for fewer jobs and voluntary turnover declined by 20% as compared to last year.