Sahm Rule Remains Below Recession Threshold Despite October Scare
• The Sahm rule uses the 3-month average unemployment rate compared to the past 12 months to predict recessions when it rises by 0.5 points or more.
• The Sahm rule came close to triggering in October, sparking debate, but unemployment has since retreated so it remains below the threshold.
• The logic is that once unemployment starts rising, historically it tends to snowball, typically increasing 4-6 points in a recession.
• Sahm believes the rule could break this time due to pandemic distortions, and doesn't expect it to trigger this cycle.
• Reasons it likely won't trigger include workers rejoining the workforce balancing labor supply/demand, and job growth rebounding in November.