Sahm Rule is a signal for the start of the recession using the unemployment rate U3 (UNRATE) where the the rolling average of the last 3 months is divided by the last 12 months minimum. If the results is over 5% the start of a recession is signaled.

Real Time Sahm Rule on FRED

“https://fred.stlouisfed.org/series/SAHMREALTIME”

I take this and modify it, given lack of confidence in the U3 rate and use the seasonally adjusted levels of insured unemployment -continuing claims (CCSA) - with the rolling average for the last 3 months of continuing claims is divided by the rolling minimum over the last year of data.

While Claudia Sahm has the trigger at 5%, the continuing claims trigger seems to be 8%.

It is interesting to consider why does a Sahm Rule “work”. It is really a complex and subtle question. My reasoning is that given the US “steady state” is year in year out growth in Labor Force and population, and a rather constant Employment Population ratio - then when it isnt so it is always a regime blow out, a stochatic “jump diffusion”. Therefore if the point can be indetified where a stochastic jump is occuring, it is certainty that it will play out in a recession. Think of the forces required to cause a jump, to force the US economy out of that rather steady state. They are massive and always do produce a jump. Minsky’s instability.