Sahm Rule Recession Indicator

SAHMREALTIME is the real-time Sahm Rule recession indicator, computed as the 3-month average unemployment rate minus the minimum 3-month-average unemployment rate over the prior 12 months. When this difference exceeds 0.5 percentage points, the Sahm Rule signals recession. The "real-time" version uses the unemployment data as it was originally reported, capturing the signal as it would have been observed in real time rather than with revisions.

Why it matters: the Sahm Rule, developed by economist Claudia Sahm at the Federal Reserve, has signaled every US recession since 1960 with no false positives until the August 2024 reading of 0.53 (which crossed the threshold but was not followed by recession). The simplicity and reliability of the rule make it one of the most-watched real-time recession gauges in macroeconomics. The 2024 false positive is the first in the rule's history and remains a debate topic.

SAHMREALTIME is at 0.27 in February 2026, well below the 0.50 threshold and substantially off the August 2024 peak of 0.53 that triggered the recession warning. The decline reflects unemployment stabilizing at 4.3-4.4% rather than continuing to rise; the 3-month average unemployment rate has actually decelerated, lowering the indicator.

The August 2024 trigger and subsequent stabilization is unprecedented: every prior Sahm Rule trigger preceded a recession by 0-12 months. The 2024-2026 dynamic of triggered-then-stabilized is consistent with the labor-market dynamic where unemployment rose due to labor-force entry rather than layoffs. The April 29 Fed hold reflects this nuance: the dovish minority sees Sahm Rule remaining at-risk if unemployment re-accelerates, while the hawkish majority sees the stabilization as evidence the Sahm signal was a false positive driven by unique post-COVID labor dynamics.

Modern SAHMREALTIME range: 0.0 in expansions (the rule sits at zero when unemployment is at or below its 12-month low), 0.53 in August 2024 (the false-positive trigger), 1.5+ in 1970, 1973-1975, 1980, 1981-1982, 1990-1991, 2001, 2007-2009, 2020 recessions. The driver is unemployment-rate dynamics: persistent rises from cycle lows trigger the rule; stabilization or declines reset it.

First, the next monthly reading. Re-acceleration above 0.40 would re-trigger recession concerns; further declines toward 0.10-0.15 would confirm the soft-landing narrative.

Second, the underlying unemployment-rate trajectory. The Sahm Rule is mechanically driven by unemployment dynamics; the rule's signal is only as good as the unemployment data.

Third, comparison with other recession indicators (RECPROUSM156N, yield curve, ISM Manufacturing PMI). When multiple indicators agree on recession imminent, the signal is high-confidence; divergence (as in 2024) signals false positives are possible.