The economic rule proposed by Claudia Sahm that uses the three-month moving average of unemployment to signal a recession is the Sahm Rule.
The rule is triggered when the three-month average of the U.S. unemployment rate rises by at least 0.50 percentage points above its lowest value during the previous 12 months. It is designed to identify that a recession has probably begun, not to forecast one far in advance. Because the calculation smooths monthly data, it provides a timely but not instantaneous signal.
Claudia Sahm developed the rule in a 2019 Brookings paper about automatically delivering fiscal assistance during downturns. Its appeal is simplicity: it uses widely available Bureau of Labor Statistics unemployment data and has historically produced few false signals. The Sahm Rule is not the official definition of a recession; that judgment belongs to the National Bureau of Economic Research, which evaluates a broader set of economic indicators and often dates recessions retrospectively. Unusual labor-market disruptions can also make any historical rule less reliable.