Sahm Rule Indicator vs Nonfarm Payrolls
Sahm Rule Recession Indicator triggers when 3-month MA unemployment rate rises 0.5pp above 12-month low. Nonfarm Payrolls (FRED PAYEMS) measures total nonfarm employment.
Also known as: Sahm Rule Recession Indicator (Sahm rule, recession indicator, Sahm) · Nonfarm Payrolls (NFP, payrolls, jobs report)
Why This Comparison Matters
Sahm Rule Recession Indicator triggers when 3-month MA unemployment rate rises 0.5pp above 12-month low. Nonfarm Payrolls (FRED PAYEMS) measures total nonfarm employment. April 2026: Sahm Rule TRIGGERED since July 2024 (3-month MA U3 4.3% above 3.5% trailing low, 0.6pp difference). Nonfarm payrolls approximately 159M total, growing ~25K avg/month (down from 200K+ pre-pandemic). Combined: Sahm triggered for 21+ months without recession (longest in 54-year history) + payrolls still positive. Unprecedented. Historically positive payrolls alongside Sahm trigger is impossible (Sahm fires near job destruction). April 2026 anomaly: Sahm triggered via labor force expansion 3-4M workers not job destruction.
The April 2026 Configuration
Sahm Rule status: TRIGGERED since July 2024. 3-month MA U3 4.3% (April 2026) vs trailing 12-month low ~3.7% (October 2024 forward). Difference 0.6pp above 0.5pp threshold.
Nonfarm payrolls: ~159M total (April 2026). January 2025-March 2026 growth: +369K total or ~25K avg/month. Pre-pandemic average 200K+ monthly.
Divergence: payrolls still positive (small) + Sahm Rule triggered. Historically impossible combination. 1948-2024: every Sahm trigger preceded recession with negative payroll prints within 0-3 months.
April 2026 reading: Sahm triggered via labor force expansion (immigration + post-pandemic 3-4M workers added). U3 rose without job destruction. Payrolls slowing but still positive. Most divergent setup in 54-year history.
Claudia Sahm has acknowledged labor force expansion may produce false positive in this cycle. April 2026 evidence supports recalibration. Sahm Rule may need adjustment for post-COVID economy.
Long-Term Range and Recent Trajectory
Sahm Rule history: triggered before every recession 1948-2024 (12 recessions). Average lead time 0-3 months. Maximum lead time 6 months (1953 recession). 100% accurate as recession predictor.
2024 trigger: July 2024 (3-month MA U3 reached 4.1%, vs trailing 12-month low ~3.5% from September 2022). Sahm Rule officially triggered.
U3 trajectory: 3.5% September 2022 cycle low to 4.3% April 2026. +80bp rise over 3.5 years. Slow grinding rise without spike.
Payrolls trajectory: peaked at ~159M Q1 2026. 2024 monthly average ~150K. 2025 monthly average ~50K (sharp deceleration). 2026 monthly average ~25K (further slowdown).
Labor force: expanded 3-4M workers 2022-2026 (immigration + post-pandemic return). Absorbed labor demand. U3 rose without job losses.
Sahm Rule duration: 21+ months and counting (April 2026). Previous longest 9 months (1953-54 recession lead time, before recession arrived). Current is 233% above prior maximum lead time.
Historical Precedents: Past Episodes
2008-09 GFC: Sahm fired Q1 2008. Payrolls peaked 138.4M January 2008. Recession declared December 2007 (
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Frequently Asked Questions
What is the April 2026 Sahm Rule vs payrolls configuration?+
Sahm Rule TRIGGERED since July 2024 (3-month MA U3 4.3% above 3.5% trailing low, 0.6pp difference). Nonfarm payrolls ~159M total, growing +25K avg/month (down from 200K+ pre-pandemic). Combined: Sahm triggered + payrolls still positive (slowing). Historically impossible combination. 21+ months past Sahm trigger without negative payroll prints (longest in 54-year history). Most anomalous reading.
Why has Sahm Rule trigger not produced negative payrolls in this cycle?+
21+ months past July 2024 trigger without recession is unprecedented. 1948-2024: every Sahm trigger preceded recession with negative payrolls within 0-3 months. April 2026 reasons: (1) Sahm triggered via labor force expansion (3-4M workers immigration + post-pandemic) not job destruction. U3 rose without layoffs. (2) AI productivity reducing hiring needs. (3) AI capex 0B+ annual sustaining demand. (4) Fiscal support continuing. (5) Fed easing room from 5.50% peak.
How is the Sahm Rule supposed to work?+
Triggers when 3-month MA U3 rises 0.5pp above prior 12-month low. 100% accurate as recession predictor 1948-2024 (12 recessions). Average lead time 0-3 months before recession start. Maximum lead 6 months. Mechanics: economic weakness causes job destruction + U3 rise. Sahm fires + payrolls turn negative simultaneously. Both indicators capture same underlying weakness from different angles.
How do recessions historically progress in payrolls?+
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