A real-time recession indicator built from the unemployment rate
When the three-month average unemployment rate rises 0.50 points above its low of the past year, a US recession has begun.
Proposed by the economist Claudia Sahm in 2019 as a trigger for automatic fiscal stimulus, the rule compares the three-month average unemployment rate with its lowest point in the previous twelve months. A rise of half a point or more has coincided with the start of every US recession since 1970 and, until 2024, had never fired outside one.
It is coincident, not leading: by the time it fires, the recession has usually been under way for a few months. It is also sensitive to labour-supply shocks, as in 2024, when immigration pushed the rate up without a downturn. worldstat.us applies the same construction to the euro area, Japan and the UK, labelled as the labour trigger.