Sahm Rule Nears Recession Signal, But Labor Market Quirks May Delay Downturn
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The Sahm rule states that if the unemployment rate increases 0.5 percentage points from its 12-month low, the economy is in recession. It has accurately predicted past recessions.
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The Sahm rule is currently close to signaling a recession, as the unemployment rate has risen close to 0.5 percentage points recently.
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But the recent rise in unemployment may be more due to an increase in the labor supply rather than weak demand for workers.
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Sahm did not intend her rule to be used for forecasting, but rather to trigger automatic payments to individuals during recessions.
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Sahm hopes her rule will be wrong this time and the U.S. avoids a recession.