Claudia Sahm created the tool that's called every recession since 1959. Here's what she's watching right now.
The economic news this week has been moving fast. Oil prices have surged past $100 a barrel for the first time since 2022, driven by the US-Israel war with Iran. The Strait of Hormuz, which carries roughly a fifth of the world’s oil and seaborne gas, has been all but closed for over a week. Three vessels were struck by unknown projectiles there just yesterday. Stock markets in the US, UK, and Europe are falling sharply. And the word “recession” is creeping back into the conversation.
If you’re feeling anxious, that’s a completely natural response. “It’s part of my job to stay level-headed, but I get anxious too,” Claudia Sahm told Jean Chatzky on this week’s episode of HerMoney. “This is very serious.”
Sahm would know. She’s the creator of the Sahm Rule, a recession indicator that has been 100% accurate going back to 1959. She’s also a former Fed section chief, a senior economist under President Obama, and the author of the widely-read Substack newsletter Stay-at-Home (SAHM) Macro.
Jean Chatzky sat down with Claudia Sahm for an urgent conversation about what’s really happening with oil prices, what the Sahm Rule is telling us right now, and what women specifically should be doing with their money in a moment like this.
Are We in a Recession?
Jean Chatzky: How serious is this conflict, and how long do you believe it will last?
Claudia Sahm: The conflict is serious. We’re in the very early days of this, and it is impossible for me or anyone else to know where this is headed in terms of whether the conflict gets worse. Does the Strait of Hormuz open up, or does it stay closed for a very long time? There are just so many unanswered questions, and I completely understand if people are feeling anxious.
I’m not on recession watch at this moment. I think there’s still a lot of strength in the US economy, but I am concerned this is another shock, as economists often refer to it. And the US economy really pushed through that last year largely pretty well. Now we’re facing another event, potentially a very big event, and thinking through where this could go.
What $100 Oil Actually Means For Your Wallet
Jean Chatzky: When it comes to oil prices, one thing I think we understand is that it’s not just the gas in our tank. There is a big trickle-down effect, from gas prices in our cars to airline flights to grocery bills to retirement accounts. Can you explain the trickle and what’s likely to happen?
Claudia Sahm: What becomes so important in this discussion is how long does this last. Gas prices respond very quickly. We’ve already seen gas prices rise over 50 cents nationally, and they’re still rising. Diesel prices, which are really important for transportation in this country, have risen notably. Think about going to the grocery store and getting your week’s worth of groceries; for many things, it’s the diesel that transports them to the grocery store. A lot of our packaging has energy products in them.
These are smaller costs. It’s not the bulk of the goods or services we’re buying, but if energy prices go up enough and stay at that high level long enough, businesses will have no choice but to pass that cost on to consumers. It won’t be as rapid or as pronounced as what we see at the pump, but it can add up.
The Bottom Line: Don’t Panic, Build a Buffer
Jean Chatzky: You’ve said you don’t think a recession is upon us, yet you recently wrote that you just don’t have “a good feeling” about this economy. What’s your advice for individuals, consumers, investors, and workers who are just trying to attain a comfortable standard of living and get to a sustainable retirement?
Claudia Sahm: Having an extra bit of caution at a moment like this makes sense. Many Americans have a larger tax refund coming their way this year. This might be a good time to set that aside and not increase your spending because you got a bigger refund. Find ways to create a bit of buffer.
We are resilient people. It’s a resilient economy. Being clear-eyed about the challenges and trying our best to navigate them is, I think, the best advice. Panic is not going to help anybody, even if things get much worse. We have to keep pushing ahead.
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