What Sahm Rule reading signals a recession?

A reading of 0.50 percentage points or higher is the classic Sahm Rule trigger — historically, that threshold has coincided with the start of every US recession since the 1970s with few false positives.

How does the Sahm Rule differ from the yield curve?

Unlike the yield curve, which often leads by a year or more, the Sahm Rule is designed to identify a recession in real time as unemployment deteriorates. It usually triggers near the official start date rather than many months ahead.

Who created the Sahm Rule?

Economist Claudia Sahm proposed the rule while at the Federal Reserve. It uses the civilian unemployment rate published monthly by the Bureau of Labor Statistics.

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Recession

Sahm Rule

How far unemployment has risen from its recent low.

0.07pp

Neutral

As of June 1, 2026

The Sahm Rule is 0.07pp as of June 1, 2026. Unemployment has risen only a little from its recent low — still well short of the 0.50-point recession signal.

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Historical crashes marked on this chart (6)

The dashed red lines flag major US market crashes within this indicator’s history. Here is what happened at each and what followed.

Kennedy Slide (1962): A rapid spring 1962 sell-off (the 'Flash Crash of 1962') wiped roughly 27% off the S&P 500 amid fears over the economy and a clash with steelmakers. Markets stabilized and recovered within about a year.
1973–74 oil crisis bear market (1973): The OPEC oil embargo, Watergate, and stagflation drove a roughly 48% decline over nearly two years — the worst bear market since the 1930s. Stocks took years to recover in real terms.
Black Monday (1987): On October 19, 1987 the Dow fell 22.6% in a single day — the worst one-day drop in history — driven partly by program trading. The economy avoided recession and markets recovered within two years.
Dot-com crash (2000): The tech bubble burst in March 2000; the Nasdaq lost about 78% by 2002 as internet valuations collapsed. A mild recession followed and tech stocks took roughly 15 years to reclaim their peak.
Global Financial Crisis (2008): The subprime mortgage meltdown and Lehman Brothers' collapse cut the S&P 500 about 57% into March 2009. It triggered the Great Recession, sweeping bailouts, and a decade of near-zero interest rates.
COVID crash (2020): Pandemic lockdowns caused the fastest bear market ever in February–March 2020, a roughly 34% plunge in weeks. Unprecedented Fed and fiscal stimulus sparked a rapid recovery to new highs.

The gray line is the trend baseline; the ±2σ bands are the standard deviation bands used to assign the verdict.

Overview

The Sahm Rule is a real-time recession indicator: it equals the three-month moving average of the US unemployment rate minus the lowest three-month average over the previous 12 months. When that gap reaches 0.50 percentage points or more, a US recession has historically already begun. Proposed by economist Claudia Sahm, it is valued for being simple, timely, and accurate — a complement to longer-lead gauges like the yield curve.

How to read it

The value is how many percentage points the three-month average unemployment rate has risen from its low over the prior year. Near zero means the labor market is stable or improving. Climbing toward 0.50 is a clear warning; at or above 0.50 the classic Sahm Rule recession signal has fired.

How it's calculated

This indicator is judged against a flat historical mean. The current reading is expressed as a z-score — standard deviations from that baseline.

Start from the monthly civilian unemployment rate (FRED UNRATE).
Compute the three-month moving average of that rate.
Subtract the minimum of that three-month average over the prior 12 months (including the current month).
A reading of 0.50 percentage points or higher is the classic recession trigger; we also show the series against its historical mean and standard-deviation bands.

Criticisms

It confirms a recession once unemployment is already rising — it is timely, but not a long lead indicator like the yield curve.
Unusual labor-market shocks (for example the brief 2020 spike) can trigger a signal that resolves quickly.
It is a recession signal, not a direct measure of stock valuation.

Frequently asked questions

What Sahm Rule reading signals a recession?: A reading of 0.50 percentage points or higher is the classic Sahm Rule trigger — historically, that threshold has coincided with the start of every US recession since the 1970s with few false positives.
How does the Sahm Rule differ from the yield curve?: Unlike the yield curve, which often leads by a year or more, the Sahm Rule is designed to identify a recession in real time as unemployment deteriorates. It usually triggers near the official start date rather than many months ahead.
Who created the Sahm Rule?: Economist Claudia Sahm proposed the rule while at the Federal Reserve. It uses the civilian unemployment rate published monthly by the Bureau of Labor Statistics.