Sahm Rule
a.k.a. Sahm recession indicator
A recession warning that triggers when the US unemployment rate rises half a point above its recent low.
The Sahm rule, named after economist Claudia Sahm, is a simple tripwire. Take the three-month average of the US unemployment rate. If it climbs 0.5 percentage points or more above its lowest level of the previous 12 months, history says a recession has probably started.
It became famous because it flagged past US recessions early and with few false alarms. Even its creator stresses it is a rule of thumb, not a law of nature, and it can misfire when, for example, a jump in job seekers rather than layoffs pushes unemployment up.
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