Odd Lots Lots More With Claudia Sahm on What the Sahm Rule Is Saying Now
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Aug 16, 2024 
Claudia Sahm, Chief Economist at New Century Advisors and creator of the Sahm Rule, dives into the complexities of current economic signals. She explains how the Sahm Rule suggests a recession might be looming due to rising unemployment, yet questions its reliability in today's unique circumstances. The discussion also explores the Federal Reserve's response and the intricate relationship between labor market trends and monetary policy. With an eye on fiscal strategies, they ponder the implications of these economic signals as election year dynamics unfold.
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Sahm Rule Explained
- The Sahm Rule, triggered when the unemployment rate rises 0.5% above its 12-month low, historically signals a recession.
- It's designed to initiate fiscal relief, not predict recessions.
Sahm Rule Limitations
- The Sahm Rule's fixed formula doesn't consider current economic nuances.
- It might be less reliable due to unique disruptions like supply shocks.
Importance of Labor Demand
- Despite low layoffs, weakening labor demand is concerning.
- A rising unemployment rate, even without mass layoffs, can signal economic trouble.