The Sahm-rule construction applied to each region's unemployment rate
When the unemployment rate rises half a point above its low of the past year, the economy is in recession; a rule that has not missed a US recession since 1970.
Unemployment does not rise gradually in a downturn. Firms hoard labour while demand softens, then lay off in waves once they conclude the weakness will last, so the rate is flat for months and then jumps. That asymmetry is why a small rise, once it appears, is a reliable sign that a recession has already begun rather than a random wobble. Arthur Okun documented the tight link between output and unemployment in 1962; Claudia Sahm turned the pattern into a trigger in 2019.
The rule: take the three-month average unemployment rate and compare it with its lowest three-month average over the previous twelve months. A rise of 0.50 percentage points or more marks a recession. In the United States this has fired within a few months of the start of every recession since 1970, and until August 2024 had never fired outside one. That 2024 crossing, driven by a surge in labour supply rather than by layoffs, is the rule's one false positive and is shown on the Sahm rule page.
worldstat.us applies the same construction to the euro area, Japan and the United Kingdom, whose labour markets absorb shocks differently: short-time work in Europe and labour hoarding in Japan keep the rate flatter, so their triggers fire later and more rarely. China and India publish no comparable monthly rate, so their cells are empty.
Sahm rule · false positive · pp · recession