Is a recession coming in the United States? The Sahm Rule has worked.
In the economic and financial world, a debate has emerged regarding a rule that has been a reliable predictor of recession in the United States for years. This is the Sahm rule, named after American economist Claudia Sahm. What is worth knowing about it?
The origin and operation of the Sahm rule:
- The Sahm rule, also known as the Sahm Rule, is an economic indicator developed by American economist Claudia Sahm. This tool allows for the accurate identification of recessions in the United States. The Sahm rule states that if the three-month moving average of the unemployment rate increases by at least 0.5 percentage points from the minimum of the previous 12 months, it is a signal of an impending recession. Claudia Sahm, the author of this rule, worked in the analytical department of the Federal Reserve and was a senior economic advisor in President Barack Obama's administration. The Sahm rule has a hundred percent accuracy and has not generated a single false signal in the last 70 years. It is worth observing how hurricanes and other factors will affect the unemployment rate in the coming months, as the current rise in unemployment may have long-term effects on the economy.
- In practice, this means that an increase in unemployment may indicate an economic slowdown or recession.
History and accuracy:
- The Sahm rule has a hundred percent accuracy and has not generated a single false signal in the last 70 years.
- In the past, an increase in the unemployment rate of this scale has been a reliable predictor of recession in the United States.
Current situation:
- In July 2024, the unemployment rate in the USA rose to 4.3%, the highest level in nearly three years.
- Concerns about a recession have arisen as the increase in unemployment triggered the so-called Sahm rule. The current unemployment situation may be influenced by the impact of Hurricane Debby. This is a Category 1 hurricane that first hit Florida and then moved northeast, threatening other states. As a result of this disaster, significant infrastructure damage occurred, as well as disruptions to business operations. A state of emergency has been declared in some counties, and mandatory evacuations have been ordered. Additionally, it is worth noting that the data on the increase in unemployment does not result from traditional layoffs, but from new individuals entering the labor market, likely immigrants. This may affect the outcomes that we would not expect in the case of a standard increase in unemployment.
In the economic and financial world, a debate has emerged regarding a rule that has been a reliable predictor of recession in the United States for years. This is the Sahm rule, named after American economist Claudia Sahm. What is worth knowing about it?
The origin and operation of the Sahm rule:
- The Sahm rule, also known as the Sahm Rule, is an economic indicator developed by American economist Claudia Sahm. This tool allows for the accurate identification of recessions in the United States. The Sahm rule states that if the three-month moving average of the unemployment rate increases by at least 0.5 percentage points from the minimum of the previous 12 months, it is a signal of an impending recession. Claudia Sahm, the author of this rule, worked in the analytical department of the Federal Reserve and was a senior economic advisor in President Barack Obama's administration. The Sahm rule has a hundred percent accuracy and has not generated a single false signal in the last 70 years. It is worth observing how hurricanes and other factors will affect the unemployment rate in the coming months, as the current rise in unemployment may have long-term effects on the economy.
- In practice, this means that an increase in unemployment may indicate an economic slowdown or recession.
History and accuracy:
- The Sahm rule has a hundred percent accuracy and has not generated a single false signal in the last 70 years.
- In the past, an increase in the unemployment rate of this scale has been a reliable predictor of recession in the United States.
Current situation:
- In July 2024, the unemployment rate in the USA rose to 4.3%, the highest level in nearly three years.
- Concerns about a recession have arisen as the increase in unemployment triggered the so-called Sahm rule. The current unemployment situation may be influenced by the impact of Hurricane Debby. This is a Category 1 hurricane that first hit Florida and then moved northeast, threatening other states. As a result of this disaster, significant infrastructure damage occurred, as well as disruptions to business operations. A state of emergency has been declared in some counties, and mandatory evacuations have been ordered. Additionally, it is worth noting that the data on the increase in unemployment does not result from traditional layoffs, but from new individuals entering the labor market, likely immigrants. This may affect the outcomes that we would not expect in the case of a standard increase in unemployment.
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