Economist Sahm warns Fed is ‘playing with fire’ despite devising recession rule

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Welcome to Extreme Investor Network, where we provide you with unique insights and expert analysis on the economy that you won’t find anywhere else. Today, we’re diving into a hot topic – the risk of tipping the economy into contraction by not cutting interest rates, as discussed by economist Claudia Sahm.

According to Sahm, the author of a time-tested rule for predicting recessions, when the unemployment rate’s three-month average is half a percentage point higher than its 12-month low, it signals that the economy is in a recession. With the jobless level on the rise in recent months, the “Sahm Rule” has garnered attention on Wall Street and raised speculation on when the Federal Reserve will start reducing interest rates.

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At Extreme Investor Network, we believe in providing our readers with in-depth analysis and unique perspectives. That’s why we’re closely monitoring the implications of the Sahm Rule and the potential risks to the economy.

Flashing a Warning Sign

Following the latest employment report, the Sahm Rule currently stands at 0.37, signaling a potential trigger point for a recession if it reaches 0.5. This rule has accurately predicted every recession since 1948, making it a crucial indicator to watch as the economy navigates uncertain waters.

Despite the rising jobless level, Federal Reserve officials have expressed little concern about the labor market, labeling it as “strong.” However, Sahm warns that waiting for a deterioration in job gains could be risky, as it could lead to a downward spiral in economic activity.

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‘Playing with Fire’

Sahm cautions that the Fed is “playing with fire” by not taking immediate action to address the risks in the labor market. She emphasizes the importance of monitoring the rate of change in employment as a key indicator of economic health.

At Extreme Investor Network, we believe in providing our readers with valuable insights that go beyond the surface level. Stay tuned for more expert analysis and unique perspectives on the economy and investing.

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