Sahm Recession Indicator Signals Start of Recession
Unemployment Rate Rise Triggers Heuristic Measure
Early Stages of Economic Downturn Indicated
The Sahm Recession Indicator, a heuristic measure developed by the Federal Reserve, has signaled the start of a recession in the United States.
The indicator is based on the three-month moving average of the national unemployment rate (U3). When the average rises, it indicates an increase in unemployment and a potential recessionary trend.
The Sahm Rule suggests that the early stages of a recession are likely underway when the average unemployment rate exceeds a certain threshold. This threshold is typically set at a level that reflects a significant increase in unemployment, such as a rise of 0.5 percentage points or more.
The current three-month moving average of the U3 rate has now exceeded the threshold, indicating that a recession is likely underway. This signal provides early warning of potential economic downturn, allowing policymakers and businesses to prepare.
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