Risk and sentiment
US Sahm Rule
The three-month average unemployment rate minus its low over the prior twelve months. Famous for the rule of thumb that a reading above 0.5 percentage points marks the start of a recession, it is built to catch how joblessness accelerates once it starts rising.
At a glance
US Sahm Rule: latest value and prior change
As of 2026-08-01, US Sahm Rule is -0.07 %p. It is 0.07 %p lower than 0.00 %p on 2026-07-01.
Across 799 available observations from 1960-01-01 to 2026-08-01, the latest value is at the tie-adjusted 20th percentile.
- Observed on
- Default comparison window
- 1960-01-01–2026-08-01
- Observations · observed cadence
- 799 · Monthly
- Data source
- FRED
A high or low percentile does not by itself make the indicator positive, negative, or a buy or sell signal.
Time-series chart
US Sahm Rule
1960-01-01–2026-08-01
Long-history series are stored as real provider observations. Index, FX, VIX, and ratio charts use historical backfill where providers expose it; Korean investor flow and margin-credit feeds expand as stable historical endpoints become available.
Recent observations and calculated changes
The ten latest chart observations. Change subtracts the previous observation; intervals vary with holidays, release schedules and missing data. A difference in rates or ratios is not an investment return.
| Observed | Value | Previous date | Difference (current − previous) |
|---|---|---|---|
| 2026-08-01 | -0.07 %p | 2026-07-01 | -0.07 %p |
| 2026-07-01 | 0.00 %p | 2026-06-01 | -0.07 %p |
| 2026-06-01 | 0.07 %p | 2026-05-01 | -0.03 %p |
| 2026-05-01 | 0.10 %p | 2026-04-01 | -0.10 %p |
| 2026-04-01 | 0.20 %p | 2026-03-01 | -0.03 %p |
| 2026-03-01 | 0.23 %p | 2026-02-01 | -0.03 %p |
| 2026-02-01 | 0.27 %p | 2026-01-01 | -0.03 %p |
| 2026-01-01 | 0.30 %p | 2025-12-01 | -0.03 %p |
| 2025-12-01 | 0.33 %p | 2025-11-01 | 0.03 %p |
| 2025-11-01 | 0.30 %p | 2025-09-01 | 0.07 %p |
Source: FRED
Interpretation guide
The Sahm rule: a recession test built on unemployment's acceleration
The Sahm rule indicator measures how far the three-month moving average of the unemployment rate has risen above its lowest point in the prior twelve months, computed by TapeFlow from the FRED unemployment series (UNRATE). Economist Claudia Sahm's rule of thumb holds that a reading of 0.5 percentage points signals a recession has likely already begun — a record that has missed almost no US recession since 1970.
Why the formula works
The unemployment rate almost never rises gently and stops. Layoffs cut income, lower income cuts spending, and weaker spending triggers more layoffs — a feedback loop that makes unemployment accelerate once it starts moving. The Sahm rule was engineered to catch the front edge of that acceleration with a single threshold.
- The three-month average exists to filter the sampling noise of any single month's rate.
- Measuring from the 12-month low sidesteps the unresolvable debate over the natural rate of unemployment.
- Its original purpose was not a market signal but an automatic trigger for fiscal stimulus payments — worth knowing when judging its design.
Standing guard before 0.5 points
Because a 0.5-point reading means recession is likely already underway, investors get more value from watching the approach than from waiting for the trigger. The observation window opens the moment the indicator lifts off zero and starts climbing.
- A sustained climb into the 0.2 to 0.4 point range is the cue to raise the weight on a labor-cooling scenario.
- By the time 0.5 points prints, markets have usually priced much of it — the signal's value lives in the run-up.
- Comparing it with TapeFlow's US Unemployment Gap, built on the raw monthly rate, shows how smoothing changes the signal.
The 2024 counterexample and the limits
In 2024 the indicator crossed 0.5 points without a recession following, strengthening the argument that unemployment rising from labor-supply expansion — a surge in immigration, for instance — is not the same as demand collapse. Sahm herself has acknowledged the rule can over-signal when supply factors dominate, which makes decomposing any trigger essential.
- Cross-check with US Initial Jobless Claims to see whether unemployment rose from layoffs or from new job seekers entering.
- If the trigger fired while labor force participation was rising, examine the supply-driven explanation first.
- A plunging US Treasury 2Y during a trigger episode is evidence markets have started pricing recession-style cuts.