Sahm Rule (recession)
Sahm Rule
What it is
Recession indicator developed by economist Claudia Sahm. Computes the difference between the 3-month moving average of the unemployment rate and its 12-month minimum. When this difference exceeds 0.50 pp, a recession is underway.
How to read it
Above 0.50, the signal is historically very reliable (triggered in every US recession since 1970, and NEVER outside one). Faster to trigger than the official NBER (which only dates recessions retrospectively). Watch monthly.
Common reference points
- No signal< 0.30
- Caution — near threshold0.30 – 0.50
- Recession in progress≥ 0.50
Orders of magnitude, not a rule: the same number does not mean the same thing from one sector to the next.
What it does not tell you
Author Claudia Sahm herself publicly expressed doubts about her indicator's reliability in 2024 — the post-COVID labor market (immigration, returning workforce) can trigger it without a true recession. Cross with other signals (PMI, jobless claims).
Other measures — Macro — stress & sentiment
Educational content. Polaris is not a registered investment adviser and makes no recommendation.