Sahm Rule Definition - Glossary

Sahm Rule is a recession indicator using a rise in unemployment rates to signal economic downturns.

Sahm Rule is an economic indicator developed by economist Claudia Sahm. It identifies recessions by analyzing unemployment rate changes. Specifically, it flags a recession when the three-month moving average of the national unemployment rate rises by 0.5 percentage points or more above its low from the previous year. This rule helps policymakers and analysts quickly identify potential economic downturns. It provides a timely signal for implementing counter-cyclical measures. By focusing on employment trends, it offers a straightforward way to assess economic health.