The Sahm Rule, named after economist Claudia Sahm, is a macroeconomic indicator used by the US Federal Reserve to identify recessions. This heuristic tool, relying on monthly unemployment data from the Bureau of Labor Statistics, assists in real-time business cycle analysis.
1950: Start of Recession Tracking
Since 1950, there have been 11 recessions recorded in the U.S. economy.
1959: First False Positive
In 1959, the Sahm rule generated its first false positive signal, indicating a recession a few months before it actually began. However, a recession did follow six months later.
1969: Second False Positive
The Sahm rule encountered its second false positive signal in 1969, again warning of a recession shortly before it started.
June 2003: False Positive Addressed
Dwaine Van Vuuren proposed modifications to the Sahm rule calculation to eliminate the false positive signal observed in June 2003, aiming to achieve 100% accuracy in recession prediction.
October 2019: Sahm Rule Published
The Sahm rule, a recession indicator, was published by the Federal Reserve Economic Data (FRED) system in October 2019. It is designed to identify the early stages of a recession.
July 2024: Sahm Rule Acknowledged
Federal Reserve Chair Jerome Powell acknowledged the Sahm rule, referring to it as a "statistical regularity" during a press conference in July 2024.
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