Sahm Rule Recession Indicator

Sahm Rule Recession Indicator tracks whether the 3-month average unemployment rate has moved at least 0.5 percentage points above its lowest reading over the prior 12 months. It is a well-known recession confirmation rule for the U.S.

It is better viewed as a confirmation signal than as a very early leading signal. Once it turns on, recession risk is usually no longer hypothetical, but it often reacts after labor deterioration is already visible.

Use it alongside jobless claims, payrolls and leading indicators to judge whether labor weakness is broadening or fading.