The FOMC's median forecast for the unemployment rate likely would trigger the @Claudia_Sahm rule which has been a perfect recession predictor (a 0.5pp increase in the three month moving average of the UR relative to the previous 12 months).
We've never seen unemployment rise as much as the Fed is forecasting (0.7pp from where it is now) without rising a lot into a full blown recession.
Could happen? Of course. The Sahm Rule not like the law of gravity.
My best guess? Definitely not.
Could happen? Of course. The Sahm Rule not like the law of gravity.
My best guess? Definitely not.
Note: I said "likely". You can draw some funky paths that keep below the Sahm rule (e.g., UR jumps to 3.95% in October 2022 and stays there through July 2023 before slowly rising).
But the idea that the economy is fine if the increase is only 0.45pp is not a best guess either.
But the idea that the economy is fine if the increase is only 0.45pp is not a best guess either.
Of course the FOMC median projections are not any one person's coherent forecast. But I'll bet we start to see more and more forecasters publishing forecasts that violate the Sahm Rule. Which is to say more and more forecasts of something that is is a pleasant possibility.
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