Money Market Funds With Jobless Rates

The chart illustrates the relationship between money market fund assets, the U.S. jobless rate, and recession periods over the past few decades. Historically, sharp increases in money market fund assets (blue line) often coincide with economic uncertainty as investors move towards safer, liquid investments. Simultaneously, the jobless rate (green dashed line) tends to spike during recessions, indicated by the shaded gray areas. For instance, during the 2008 financial crisis and the 2020 COVID-19 pandemic, we observe a surge in money market fund assets and a corresponding rise in unemployment rates. Both indicators reflect investor and consumer fear, as well as economic contraction.

As we approach 2024, the chart shows an unprecedented rise in money market fund assets, nearing $7 trillion, coupled with a relatively low but slightly rising jobless rate. This trend may signal growing investor caution amid concerns of tighter monetary policy, inflationary pressures, or global economic uncertainty. If this pattern continues into 2025, it could suggest heightened recession risks. Monitoring further increases in money market fund assets and any sharp uptick in unemployment rates will be critical for gauging economic vulnerabilities and predicting a possible recession.