Sahm Rule Recession Indicator

- May 10, 2025
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The Sahm Rule Recession Indicator signals the start of a recession when the three-month moving average of the unemployment rate rises by 0.5 percentage points or more relative to its minimum during the previous 12 months.

Unemployment Rate Data Input

Enter Monthly Unemployment Rate Data (Last 15 Months)
Month Year Unemployment Rate (%)
Analysis Options
percentage points
months
months

About the Sahm Rule

The Sahm Rule, developed by economist Claudia Sahm, provides a reliable real-time recession indicator based on changes in the unemployment rate. It triggers when the three-month average unemployment rate rises 0.5 percentage points or more above its low during the previous 12 months.

How It Works

The Sahm Rule compares current unemployment conditions to recent lows:

  1. Find the lowest 3-month average unemployment rate over the past 12 months
  2. Calculate the current 3-month average unemployment rate
  3. Measure the difference between these two values
  4. If the difference exceeds 0.5 percentage points, a recession signal is triggered
Historical Performance

The Sahm Rule has successfully signalled the onset of recessions since the 1970s:

  • It provides early warning signals at the start of recessions
  • It minimises false positives compared to other indicators
  • It uses readily available unemployment data that is rarely revised substantially
Applications

The Sahm Rule has several practical applications:

  • Economic Policy: Helps policymakers identify recessions quickly to implement countercyclical measures
  • Investment Strategy: Provides signals for defensive portfolio adjustments
  • Business Planning: Offers early warning for businesses to prepare for economic downturns
  • Research: Serves as a benchmark for comparing other recession indicators

Understanding the Sahm Rule Recession Indicator

The Sahm Rule Recession Indicator is a helpful tool for tracking potential economic downturns. Developed by economist Claudia Sahm, this indicator uses changes in the unemployment rate to signal when a recession might begin. It becomes active when the three-month moving average of unemployment rises by 0.5 percentage points or more from its lowest point in the past year. This makes it a reliable measure for both policymakers and everyday users.

How to Use the Calculator

The Sahm Rule Recession Indicator calculator is easy to use. You can input unemployment rate data manually or upload a CSV file. If you choose to input data manually, you can enter monthly unemployment rates for the last 15 months. Alternatively, you can upload a CSV file with your data, as long as it includes the date and unemployment rate information. This flexibility makes the tool accessible for various users.

Key Features of the Calculator

This calculator offers several key features that enhance its usability:

  • Custom input methods for flexibility in data entry.
  • Options to adjust threshold values and lookback periods.
  • Visualisation of results through charts for better understanding.
  • Clear and concise output showing current indicator value and recession signals.

Analysing Your Results

Once you've entered your data, the calculator provides immediate results. It shows the current value of the Sahm Rule Indicator and indicates whether a recession signal is present. If the value exceeds the set threshold, it will prompt a warning. This straightforward analysis helps you quickly understand the economic situation.

Why the Sahm Rule Is Significant

The Sahm Rule is important because it provides real-time insights into the economy. Since its introduction in the 1970s, it has successfully identified the start of recessions. By focusing on readily available unemployment data, it helps to reduce the number of false signals compared to Other indicators. This makes it a respected choice among economists and analysts alike.

Real-World Applications of the Indicator

This recession indicator has several practical applications:

  • Economic Policy: It helps governments act swiftly in response to economic changes.
  • Investment Strategies: Investors can adjust portfolios based on potential recessions.
  • Business Planning: Companies can prepare for downturns by anticipating changes in the economy.

Benefits of Using the Calculator Regularly

Using the Sahm Rule Recession Indicator calculator regularly can keep you informed about economic shifts. By consistently tracking the unemployment rate, you can observe trends and changes over time. This knowledge allows you to make educated decisions, whether you're a policymaker, investor, or business owner. Staying aware of these signals is key to navigating economic fluctuations.

Get Started with the Sahm Rule Calculator

Ready to track economic changes? The Sahm Rule Recession Indicator calculator is at your fingertips. With its user-friendly interface and robust features, you can gain valuable insights into the unemployment rate and its implications for the economy. Start using the calculator today to empower yourself with knowledge about potential recession signals.