The Sahm rule has gotten more attention recently and predictably that has come with questions about who created it. I did. Now is a good opportunity to talk about on macro tools in general.
Another clear and useful column. I agree that the focus of your tool is and should be on directly moving fiscal policy, for the express purpose of triggering government support for workers suffering, or at risk of suffering, unemployment due to recession.
Also, I'm sorry you get trolled and smeared. I'm glad that Dudley credits you for creating the SAHM rule.
I dropped out of a part time PhD economics program in the late 80s early 90s because I thought the curriculum was completely irrelevant and out of touch with actual economics. The field is still filled with practitioners who believe economics is a hard science. It is not- it describes behavior of human beings and is therefore not a science but a way of describing human behavior.
Human behavior is fickle so an economist must appreciate that theory must be adaptable and rooted in reality. Digging through data and applying it to real world events is a refreshing approach. It beats sitting in the ivory tower. Thank you for the article!
Beware, if you are right and "Sahm Rule’s Goal (is) A rule to automatically send out stimulus checks as early as possible in a recession," you are in for great trouble. For lack of a better name, I will call it the "Public Health Paradox." That is when public health is successful, everything proceeds normally - there is no epidemic, the water is clear and drinkable, vaccine preventable diseases disappear. If Sahm rule wisdom allowed early release of stimulus checks, no economic contraction or recession would follow and soon the meanies will be after your scalp for wasting so much $$$.
No stimulus — from fiscal or Fed — stops a recession once it starts. The best we can do is make it less bad. If somehow we get an automatic stabilizer that avoids even one recession, they can have my scalp.
Claudia, Please ignore the naysayers and continue your good work of analyzing the economy and informing administrations, corporations and investors about how things could shape up in the future.
I do have one little disagreement with your post. "Automatic stimulus checks". Any automated giving out of money to any person, any organization, any business...just does not seem like prudent fiscal policy. A more surgical and target response is more appropriate, imo, depending on the situation and who needs it the most. Cheers!
If the Sahm rule is ‘too simplistic’ yet heuristically ‘always right’ (my words based on history) what other data points are important to add to it for decision makers (the fed) to decide we are in a recession and start to stimulate the economy?
As a practical aside (but a different conversation) there appears to be a ‘feeling’ that Covid era stimulus contributed to inflation. I have concerns that more stimulus in the near future is politically unpalatable..
Love your work and I’m thrilled that this rule is getting press/attention.
I love the Sahm rule! Anything that can help us avoid more pernicious recessions by indicating when we should quickly change fiscal policy is great. I only hope policy makers continue to follow it.
One quibble: You write, "The Sahm rule indicates that the U.S. economy is in the early months of a recession. " I think what you meant to write is, " The Sahm rule indicates WHETHER the U.S. economy is in the early months of a recession. " When I first read your sentence, I thought, "We're in a recession now? It sure doesn't seem like it!"
Thank you for your efforts to develop the usefulness of your tool indicator showing we’re in a recession. Next step, eliminate the tool with a Federal transition opportunity (job guarantee). I recommend we continue to call the haters out with facts…if they would only overcome their fears and listen.
Is it possible that in instances when the employment number is below the 4% line the rule may not apply, or were there instances where there was the required jump but the employment number was still below 4%? Sorry if this is an ignorant question.
Thank you. I'm far from being an economist. I'm just an average guy who has a creative job but loves finance. Weird combo. I was wondering if 'this time was different ' since below 4% still represents a strong labor market and we were starting from such a low level. I guess that's irrelevant. Thank you for your reply!
It's relevant in how much we have at stake. This labor market is the best in generations and arguably ever, since the 1960s was not as inclusive. PS "Average guys" often understand the economy better than macroeconomists.
Claudia, i really think you need to ignore the harassers, the trolls, the idiots. A saying is - it takes a lot more time and energy to debunk/disprove Bullshit than the amount of energy and time it takes in creating it. Spend your time in all your constructive work and stop giving attention to harassers.
a) Debunking bullshit is basically what my macro life is, and I have to pay attention to what BS they're up to. b) From the start of my professional career I (and many women in macro get this too) have had to defend my worth as an economist. c) Ignoring a problem means it gets worse. EJMR is one of many examples. Brunet's last post about me is full on lies and people do read him.
I love your work! Thank you for continuing to be you.
Another clear and useful column. I agree that the focus of your tool is and should be on directly moving fiscal policy, for the express purpose of triggering government support for workers suffering, or at risk of suffering, unemployment due to recession.
Also, I'm sorry you get trolled and smeared. I'm glad that Dudley credits you for creating the SAHM rule.
I dropped out of a part time PhD economics program in the late 80s early 90s because I thought the curriculum was completely irrelevant and out of touch with actual economics. The field is still filled with practitioners who believe economics is a hard science. It is not- it describes behavior of human beings and is therefore not a science but a way of describing human behavior.
Applying it to individual states does seem silly in my opinion.
Human behavior is fickle so an economist must appreciate that theory must be adaptable and rooted in reality. Digging through data and applying it to real world events is a refreshing approach. It beats sitting in the ivory tower. Thank you for the article!
I do not like recessions, Sam-I-am.
I do not like them, Claudia Sahm.
Would you like them in a boom or bust?
Would you like them when markets adjust?
Would you like them here or there?
I would not like them anywhere!
I do not like recessions, Sam I am
I do not like them, Claudia Sahm.
Would you try them with a rule?
Would you stimulate when labor markets cool?
You may like Sahm's Rule, you will see.
You may like instead of falling GDP!
I do not like Sahm's Rule you see,
I wait for the conference boards ruling on GDP.
Not in a boom, not in a bust,
I will wait after, until markets adjust.
I do not like them here or there.
I do not like them anywhere.
I do not like recessions, Sam-I-am.
I don't like this tool from Claudia Sahm!
Would you, could you, with fiscal spend?
Would you, could you, make this trend end?
I would not, could not, with fiscal spend.
I could not, would not, make this trend end.
Not with Sahm's Rule. Not in GDP.
Not in a boom. You let me be.
You do not like them, so you say.
Try them, try them, and you may!
Sam! If you will let me be,
I will try them. You will see.
(Say!)
I like Sahm's Rule! I do, I do!
And I would use them in a bust.
Knowing before labor markets adjust.
We can check it every day,
And send out checks without delay!
I love this! Thank you.
Beware, if you are right and "Sahm Rule’s Goal (is) A rule to automatically send out stimulus checks as early as possible in a recession," you are in for great trouble. For lack of a better name, I will call it the "Public Health Paradox." That is when public health is successful, everything proceeds normally - there is no epidemic, the water is clear and drinkable, vaccine preventable diseases disappear. If Sahm rule wisdom allowed early release of stimulus checks, no economic contraction or recession would follow and soon the meanies will be after your scalp for wasting so much $$$.
No stimulus — from fiscal or Fed — stops a recession once it starts. The best we can do is make it less bad. If somehow we get an automatic stabilizer that avoids even one recession, they can have my scalp.
Claudia, Please ignore the naysayers and continue your good work of analyzing the economy and informing administrations, corporations and investors about how things could shape up in the future.
I do have one little disagreement with your post. "Automatic stimulus checks". Any automated giving out of money to any person, any organization, any business...just does not seem like prudent fiscal policy. A more surgical and target response is more appropriate, imo, depending on the situation and who needs it the most. Cheers!
If the Sahm rule is ‘too simplistic’ yet heuristically ‘always right’ (my words based on history) what other data points are important to add to it for decision makers (the fed) to decide we are in a recession and start to stimulate the economy?
As a practical aside (but a different conversation) there appears to be a ‘feeling’ that Covid era stimulus contributed to inflation. I have concerns that more stimulus in the near future is politically unpalatable..
Love your work and I’m thrilled that this rule is getting press/attention.
I love the Sahm rule! Anything that can help us avoid more pernicious recessions by indicating when we should quickly change fiscal policy is great. I only hope policy makers continue to follow it.
One quibble: You write, "The Sahm rule indicates that the U.S. economy is in the early months of a recession. " I think what you meant to write is, " The Sahm rule indicates WHETHER the U.S. economy is in the early months of a recession. " When I first read your sentence, I thought, "We're in a recession now? It sure doesn't seem like it!"
Thank you for your efforts to develop the usefulness of your tool indicator showing we’re in a recession. Next step, eliminate the tool with a Federal transition opportunity (job guarantee). I recommend we continue to call the haters out with facts…if they would only overcome their fears and listen.
Is it possible that in instances when the employment number is below the 4% line the rule may not apply, or were there instances where there was the required jump but the employment number was still below 4%? Sorry if this is an ignorant question.
That's why the Sahm rule is in changes, not levels. Back in the 1960s it works when unemployment was below 4%.
Thank you. I'm far from being an economist. I'm just an average guy who has a creative job but loves finance. Weird combo. I was wondering if 'this time was different ' since below 4% still represents a strong labor market and we were starting from such a low level. I guess that's irrelevant. Thank you for your reply!
It's relevant in how much we have at stake. This labor market is the best in generations and arguably ever, since the 1960s was not as inclusive. PS "Average guys" often understand the economy better than macroeconomists.
Very clear, thanks. Short form, maybe useful?
The Sahm Rule doesn't predict a recession. It tells us whether we're *in* a recession.
I have said that multiple times. Short form, medium form, long form.
See above, edited. Better?
Should the Fed use the Sahm rule for changing the settings of its monetary policy instruments?
No. it's too simplistic.
Claudia, i really think you need to ignore the harassers, the trolls, the idiots. A saying is - it takes a lot more time and energy to debunk/disprove Bullshit than the amount of energy and time it takes in creating it. Spend your time in all your constructive work and stop giving attention to harassers.
I really think you do not know how harmful what you just said is and should not again do it again.
Pure general curiosity: I have a sense of why you say that, but wd be v interested to hear a v brief explanation from you. Thx.
a) Debunking bullshit is basically what my macro life is, and I have to pay attention to what BS they're up to. b) From the start of my professional career I (and many women in macro get this too) have had to defend my worth as an economist. c) Ignoring a problem means it gets worse. EJMR is one of many examples. Brunet's last post about me is full on lies and people do read him.