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