Does the Sahm Rule Point to a U.S. Recession? 📉

What We’re Showing

This graphic shows the Sahm Rule recession indicator since 1949, based on data from the Federal Reserve.

The Sahm Rule states that when the three-month average U.S. unemployment rate increases by 0.5% from the 12-month low, the U.S. is already in a recession.

Key Takeaways

• In July, the Sahm Rule flashed red as U.S. unemployment increased to 4.3%, up more than 0.5% from its 12-month low
• The Sahm Rule has indicated virtually every recession since 1949
• One important distinction with today is that an influx of unemployed entrants into the labor pool drove half of this increase in the Sahm Rule
• By contrast, layoffs were a primary driver behind rising unemployment in past recessions