Goldman Sachs Exchanges Will Fed policy trigger a US recession?
Sep 5, 2024
Claudia Sahm, Chief Economist at New Century Advisors and creator of the 'Sahm rule' recession indicator, shares her insights on the economy's precarious state. She discusses the implications of rising unemployment rates and what they signal for recession fears. Sahm explains the nuances of her recession indicator, emphasizing its recent activation despite positive trends. The conversation also covers the Federal Reserve’s delicate balancing act in policy-making and its potential impact on economic stability. It's a deep dive into what’s really shaping the U.S. economy.
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Sahm Rule Trigger
- The Sahm Rule, triggered by a 0.5% unemployment rate rise, historically signals a recession.
- Current economic indicators like income and spending growth contradict this signal.
Unemployment Dynamics
- Rising unemployment, usually due to lower worker demand, can trigger a recessionary feedback loop.
- A labor supply burst can also increase unemployment but with positive long-term effects.
Recession Concerns
- Claudia Sahm expresses concern about the slowing pace of payroll gains and rising unemployment.
- Her base case isn't a recession, given the Fed's ability to adjust interest rates.