Sahm rule
Rise in unemployment (Sahm rule). Jobs.
Updated
What is it?
How much US unemployment has risen in recent months compared with its best moment of the past year.
Federal Reserve indicator of unemployment momentum. It has flagged every US recession since 1970, with a delay.
Why does it matter?
If it rises 0.5 points or more, historically the economy was already in recession.
What has happened in other crises?
It has flagged every US recession since 1970, always with a delay: it appears when the recession has already started.
When should it be a concern?
It is a concern when unemployment is rising quickly. Crisis Monitor turns each reading into a score from 0 to 100 using these bands:
| Situation | Value | What does it mean? |
|---|---|---|
| Calm | ≤ 0.10 | Score 0: no stress |
| Watch | ≥ 0.35 | Score 33: starts to draw attention |
| Stress | ≥ 0.50 | Score 66: risk zone |
| Extreme | ≥ 1.00 | Score 100: like in the worst crises |
Between one band and the next, the score is interpolated.
Sahm rule in past crises
Since January 1990, its weekly low was -0.37 (Oct 2021) and its high was 9.50 (Jul 2020). The typical level (the median) is 0.03.
| Crisis | At the start | High during the crisis |
|---|---|---|
| 1990-91 recession | 0.03 | 0.97 (Mar 1991) |
| Russia and LTCM 1998 | -0.07 | 0.17 (Oct 1998) |
| Dot-com bubble and 2001 recession | 0.00 | 1.63 (Jan 2002) |
| Global Financial Crisis 2007-09 | 0.10 | 3.73 (Jun 2009) |
| European debt crisis 2011 | -0.20 | 0.23 (Aug 2011) |
| 2015-16 market scare | -0.10 | 0.00 (Jun 2015) |
| Q4 2018 sell-off | 0.03 | 0.03 (Sep 2018) |
| COVID panic 2020 | 0.00 | 4.00 (May 2020) |
| 2022 bear market | -0.33 | 0.07 (Nov 2022) |
Weekly data. Crises that do not appear predate the series.
How does Crisis Monitor use it?
- Area: Labor market (20% of the index). Whether people are starting to lose their jobs. It is what you notice most in real life.
- When does it move? Moves with the crisis.
- Data frequency: monthly.
- Quick alarm: Yes, it is one of the 5 ignition points.
The index combines 17 indicators. See the methodology to learn how it is calculated.
Data source
FRED, Federal Reserve Bank of St. Louis (SAHMREALTIME). Data may arrive late and does not constitute financial advice.
Frequently asked questions
What is the Sahm rule?
A signal devised by economist Claudia Sahm: it triggers when the 3-month average of US unemployment rises 0.5 points or more above its low of the previous 12 months.
Is the Sahm rule reliable?
It has flagged every US recession since 1970, but always with a delay: it appears when the recession has already started. That is why it is not useful for anticipating one.