Sahm Rule Triggered
Unemployment rate rises 0.5pp from its 12-month low
The Sahm Rule (created by economist Claudia Sahm) triggers when the 3-month average unemployment rate rises 0.5 percentage points above its lowest point in the prior 12 months. It has identified every recession since 1970 in real-time with zero false positives.
| Date | 1M return | 1Y return | 5Y return |
|---|---|---|---|
| 1949-02-01 | -4.5% | +12.7% | +68.6% |
| 1953-11-02 | +1.3% | +33.1% | +109.1% |
| 1957-11-01 | +2.7% | +26.9% | +42.8% |
| 1959-11-02 | +2.3% | -6.0% | +48.3% |
| 1970-03-02 | +0.4% | +7.8% | -11.3% |
| 1974-07-01 | -7.8% | +10.7% | +18.2% |
| 1980-02-01 | -2.0% | +10.2% | +54.1% |
| 1990-10-01 | -3.5% | +23.1% | +84.7% |
| 2001-06-01 | -1.9% | -18.5% | -0.2% |
| 2008-02-01 | -4.9% | -40.9% | +7.2% |
| 2020-04-01 | +14.6% | +62.7% | +104.9% |
| 2024-08-01 | +3.7% |
What history says
Editorial commentary written by ALAN analysts. Figures cited below are analyst-authored context — they are not derived from the chart above and may reflect different windows or sources.
Unlike many recession indicators, the Sahm Rule has never triggered outside of a recession. When it fires, the recession has almost certainly already begun.
The Sahm Rule is a confirmation indicator, not a leading indicator. It confirms the recession has started. Portfolio adjustments (extending duration, reducing cyclicals) should ideally precede it.
Because the labor market lags the economy, by the time unemployment rises enough to trigger Sahm, equities have typically already corrected. Selling at this point often locks in losses near the bottom.
By the time the Sahm Rule fires, the recession has effectively begun and stocks have typically already corrected — selling on the trigger has meant selling near the lows. Put it to better use: audit whether the coming year's withdrawals can be met without touching equities, and record which late-cycle adjustments you wish you had made as a written checklist for the next cycle.