What Is the Sahm Rule? A Recession Signal
The Sahm rule is a recession signal built from one number: the unemployment rate. It fires when the 3-month average unemployment rate is 0.50 percentage points or more above its lowest 3-month average of the previous 12 months. It was designed to confirm that a recession has started, not to predict one. As of September 2026 the gap is 0.00, far below the trigger.
How does the Sahm rule work?
The rule compares two numbers, both built from the monthly US unemployment rate:
Sahm gap = latest 3-month average unemployment rate − lowest 3-month average of the previous 12 months
- Gap under 0.50: no signal. Unemployment may be drifting up, but not fast enough.
- Gap of 0.50 or more: the rule has triggered. Historically the US was already in a recession, or just entering one.
Example: if the lowest 3-month average in the past year was 3.7% and the latest is 4.2%, the gap is 0.5 and the rule triggers. The glossary entry for the Sahm rule has the short definition.
Why does it use the 3-month average and the 12-month low?
A single month of the unemployment rate is noisy and often revised. Averaging three months smooths that out. Measuring against the 12-month low captures what matters: how far unemployment has climbed from its recent floor. A high but stable rate never triggers it. A fast rise does.
Claudia Sahm, a former Federal Reserve economist, proposed it in 2019. Unemployment tends to rise slowly at first and then quickly, so a rise of half a point inside a year has historically been the point where the climb keeps going.
The Sahm gap since 1969, with US recessions shaded. The dashed line is the 0.50 trigger. Computed from the monthly unemployment rate (FRED UNRATE); the 2020 peak of about 9.4 is cut off at the top.
What is the Sahm rule's track record?
Computed from today's unemployment data, the gap crossed 0.50 after every US recession began since 1969, between one and eight months in:
| Recession start | Gap first reached 0.50 | Months after the start |
|---|---|---|
| December 1969 | March 1970 | 3 |
| November 1973 | July 1974 | 8 |
| January 1980 | February 1980 | 1 |
| July 1981 | November 1981 | 4 |
| July 1990 | October 1990 | 3 |
| March 2001 | June 2001 | 3 |
| December 2007 | February 2008 | 2 |
| February 2020 | April 2020 | 2 |
It also crossed 0.50 in 2003, after the 2001 recession had already ended, and in 2024, when no new recession followed. Dates use revised data, so FRED's real-time series can differ by a month. Recession dates are from the Crash Indicator track record.
Is the Sahm rule a leading indicator?
No, and that is the most common misunderstanding. It is a coincident signal: it confirms a downturn after it begins. On this site's replay of the eight recessions since 1969, using a 24-month look-ahead window, the rule flagged before only two of them, which is what you would expect from a rule built to confirm. Leading signals, such as the 10-year minus 2-year yield curve, work on a longer clock.
| Signal type | What it tells you | Example |
|---|---|---|
| Leading | Stress is building, a downturn may follow | Inverted yield curve |
| Coincident | A downturn is under way | Sahm rule at 0.50 |
| Lagging | A downturn is already confirmed in the data | Unemployment rate level |
Where does the Sahm rule stand now?
The Sahm gap is 0.00 for September 2026, with unemployment at about 4.2%. Its latest peak was 0.57 in August 2024, when it briefly passed the trigger before falling back. Nothing in the current reading says a recession has started.
The same number drives the recession flag in the Minsky model on the Crash Indicator page, where it sits next to 25 other indicators. It describes the labour market today, not a forecast. For the valuation side of the same page, read what the Shiller CAPE ratio is.
Sahm rule FAQ
Who created the Sahm rule?
Claudia Sahm, a former Federal Reserve economist, proposed it in 2019 as a trigger for automatic stabilizing payments in a downturn. The St. Louis Fed's FRED database publishes the series.
Has the Sahm rule ever given a false signal?
Computed from today's unemployment data, the gap crossed 0.50 in 2003 and again in 2024 with no new recession starting. Every recession since 1969 was also confirmed, one to eight months after it began.
Is the Sahm rule a leading indicator?
No. It is built to confirm a recession that has already started, so it is not expected to warn in advance. Leading signals such as an inverted yield curve work on a different clock.
Why does the Sahm rule use a 3-month average?
One month of the unemployment rate is noisy and gets revised. Averaging three months smooths that noise, and comparing against the 12-month low measures how far unemployment has risen from its recent floor.
Where can I see the Sahm rule today?
The Crash Indicator page shows the latest reading from FRED, refreshed weekly, next to a track record of how it behaved before each recession since 1969.