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Sahm Rule
About This Indicator
What Is the Sahm Rule?
How far the three-month average unemployment rate has risen above its lowest three-month average of the prior year, in percentage points, from FRED, which credits it to Claudia Sahm. It crosses 0.50 when a recession has most likely already begun.
Why Does It Matter?
Recessions are dated in hindsight: the one that began in December 2007 was not announced until December 2008. Using unemployment as first reported, the rule reached 0.50 within about four months of the start of every recession from 1960 to 2020, though it also crossed in 1976 with no recession.
Can Politics Influence It?
Only through unemployment, its one input: whatever speeds or slows hiring and layoffs reaches it, and nothing else does.
Key Idea
Layoffs feed on themselves, as people who lose jobs spend less and cost others theirs, so a half-point rise has usually kept going. The rule cannot say why unemployment is rising: in 2024 it crossed 0.50 while layoffs stayed low and hiring slowed.
Not Scored
Source: FRED (Claudia Sahm). SAHMREALTIME.
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