Sahm Rule Indicator
Selected range · February 1949 — June 2026
About this chart
The Sahm Rule is a labor-market indicator designed to identify the beginning of a U.S. recession after unemployment starts rising meaningfully.
The indicator is based on the national unemployment rate. Instead of reacting to a single monthly change, it uses a three-month average to reduce the effect of temporary fluctuations and make the underlying labor-market trend easier to see.
The current three-month average is compared with the lowest three-month average recorded during the preceding twelve months. This measures how far unemployment has risen from its recent low.
When the Sahm Rule reaches or exceeds 0.50 percentage points, it indicates that the labor market has weakened substantially relative to the previous year. Historically, this threshold has usually been reached near the beginning of U.S. recessions.
A value below 0.50 means that the increase in unemployment has not reached the rule’s standard recession threshold.
A rising value means that unemployment is moving farther above its recent low, while a falling value means that the difference is becoming smaller.
The indicator does not measure the unemployment rate itself. Unemployment can still be relatively low in absolute terms while the Sahm Rule rises if the unemployment rate increases quickly from an even lower level.
The Sahm Rule is mainly a confirmation indicator. It is designed to recognize a recession relatively early after labor-market deterioration becomes visible, rather than to forecast a recession many months in advance.
The chart should therefore be used together with other economic indicators. Crossing the threshold does not determine how long or severe a recession will be, and remaining below the threshold does not guarantee that the economy is free from risk.
Limitations
- The indicator is designed to identify the early stages of a recession after labor-market conditions have already weakened, so it is not a leading indicator.
- The model relies on the unemployment rate, which is estimated from survey data and may be revised as new information becomes available.
- The three-month averaging and comparison with the previous 12-month minimum reduce noise but can delay the signal when labor-market conditions deteriorate rapidly.
- A threshold breach indicates that unemployment has risen meaningfully from its recent low, but it does not measure the depth, duration, or broader economic severity of a recession.
- Unusual labor-market disruptions, changes in labor-force participation, demographic shifts, or temporary layoffs can affect the indicator without reflecting a typical business-cycle downturn.
- The rule was calibrated on U.S. historical data, and its reliability may vary across future economic regimes or in episodes unlike those in the historical sample.
- The indicator should be interpreted together with broader economic data and should not be treated as a precise recession-timing or market-timing signal.
Methodology
The Sahm Rule is calculated from the seasonally adjusted monthly U.S. unemployment rate.
A value of 0.50 percentage points or more represents the standard Sahm Rule recession threshold. The model uses monthly unemployment observations beginning in January 1948. Because the calculation requires both a three-month average and a twelve-month comparison window, the first complete indicator value is available in February 1949.
Data sources
U.S. civilian unemployment rate, seasonally adjusted
Range: January 1948 to the latest available observation
Source: U.S. Bureau of Labor Statistics, Unemployment Rate [UNRATE], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/UNRATE