Sahm Rule Vs. FED's Own Recession Probability IndicatorThere is an interesting divergence between Claudia Sahm's real-time recession indicator and the FED's own recession probability indicator.
Historically, if we look at this chart, we get a rise in both together into a recession.
This time, the Sahm-Rule recession indicator has tripped the threshold at which recessions usually occur, but without a corresponding rise in the FED's recession indicator.
So, I believe one of two scenarios will play out here.
Either:
A - The FED's recession indicator will "correct" to meet the Sahm rule indicator's action and trip it's own recession threshold thus confirming the recession.
B - The Sahm rule is incorrect here and will correct back down - thus disconfirming the recession - to meet the FED's own indicator.
I believe by watching this spread and how it resolves, we may get an insight into where the economy is going.
