Sahm's Rule Recession Indicator
An indicator that signals a recession when the 3-month moving average of the U.S. unemployment rate rises 0.5 percentage points or more above its low during the previous 12 months.
Last Updated:
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Source:
FRED
Sahm's Rule Indicator Trend
What is the Sahm's Rule?
The Sahm's Rule is an early warning recession indicator developed by former Federal Reserve economist Claudia Sahm. It signals that a recession has begun when the 3-month moving average of the U.S. unemployment rate rises 0.5 percentage points or more above its lowest point over the previous 12 months. This indicator has accurately identified every recession since 1970.
How It Works
The Sahm's Rule detects rapid changes in unemployment. When unemployment rises quickly from its trough, a recession has likely already begun. The 0.5 percentage point threshold distinguishes normal business cycle fluctuations from actual recessions. The strength of this indicator is that data is provided in real-time with minimal subsequent revisions.