Former Fed economist Claudia Sahm, the founder of Sahm Consulting and creator of The Sahm Rule — a recession indicator — joins Julia La Roche on episode 107 for a wide-ranging discussion on macro and the Federal Reserve.
In this episode, Sahm noted that the economy is potentially at an inflection point, and we’ll know soon if we’re getting a soft landing or are headed in a slow grind that could lead us over the edge and into recession.
At the moment, she’s in the 50-50 baseline case when it comes to recession. To be sure, Sahm is concerned about the cooling in the labor market. She noted, "Once things get going in a bad direction, they keep going.”
Throughout her career, Sahm has worked at the Federal Reserve, the White House, ad has advised Congress. She’s the creator of the Sahm Rule, a reliable indicator of a recession based on the unemployment rate. The rule was developed as a trigger for automatically sending out relief like stimulus checks in a recession, taking the politics out of it.
Links:
Stay-At-Home-Macro: https://stayathomemacro.substack.com
X: https://twitter.com/Claudia_Sahm
LinkedIn: https://www.linkedin.com/in/claudiasahm/
0:00 Welcome Claudia Sahm
0:44 Potentially an inflection point
2:07 Labor market
3:40 What’s weighing on consumers?
6:30 Long and variable lags
10:03 Has the Fed done too much?
11:50 Risk of doing too much is aligned with the risk of doing too little
14:58 Fed’s inflation fight
19:02 Assessment of the consumer today
23:09 Great Recession
25:54 Sahm Rule
31:17 Are we in a recession according to the Sahm Rule?
32.22 Labor
36:00 Risk of a recession?
40:05 50/50 case of a recession
42:56 Housing
47:22 A decade Federal Reserve
53:00 Storytelling is the most important part of the forecasting
57:00 Groupthink at the Fed
1:01:12 Parting thoughts
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