Sahm Rule Recession Indicator
Created by economist Claudia Sahm. Signals a potential recession when the unemployment rate's three-month moving average rises by at least 0.50 percentage points from its 12-month low.
Current Reading
0.27%
Sahm Rule at 0.27%, falling. Well below the 0.50% trigger. Was 0.43% in November 2025.
How It Works
The indicator signals a potential recession when the three-month moving average of the unemployment rate rises by at least 0.50 percentage points from its low over the previous 12 months.
In current U.S. employment terms, a 50 basis point change represents approximately 840,000 workers transitioning from employment to unemployment.
Why It Matters
Unemployment is considered a lagging indicator. Businesses typically exhaust cost-cutting measures before resorting to layoffs, meaning unemployment changes may appear after economic stress begins. This makes it "the cost cutting of last resort" for employers.
However, the Sahm Rule has identified every recession since 1970 in real time, with no false positives. That track record makes it one of the most reliable recession signals available.
Background
Claudia Sahm identified a consistent pattern while working at the Federal Reserve: unemployment rates tend to rise during the onset of recessions. She proposed using this observation as a mechanism for signalling economic contractions based on unemployment data.
The rule was formally introduced to the public through the Federal Reserve Economic Data (FRED) system in October 2019. A defining characteristic is its reliance on a single data series, the monthly national unemployment rate, making it simpler than indicators requiring multiple inputs.
Data Source
FRED series: SAHMREALTIME (real-time) and SAHMCURRENT (revised). Updated monthly.
Credit
Developed by economist Claudia Sahm. Updates available through her newsletter, "Stay at Home Macro."