Unemployment Rate

5
Underlying value was 0.53 as of August 6, 2024

Status 🚦

  • Score: 5
  • Underlying value: 0.53
  • Last updated: August 6, 2024

Scoring method: We map the Sahm Rule value to a score as follows: If the value is 0.0 or less, the score is 1. If the value is above 0.0, but less than 0.2, the score is 2. If the value is at least 0.2, but less than 0.35, the score is 3. If the value is at least 0.35, but less than 0.5, the score is 4. If the value is 0.5 or more, the score is 5.

Current score reason: The current Sahm Rule value is above 0.5.

Description 📝

The unemployment rate measures the percentage of people in the labor force who are currently unemployed and actively seeking employment. When the unemployment rate is trending up, it's a sign of a weakening economy. To check whether the unemployment rate is signalling a recession, it's often tested against the Sahm Rule. The Sahm Rule states that, "when the three-month moving average of the national unemployment rate is 0.5 percentage point or more above its low over the prior twelve months, we are in the early months of recession".

Use as a recession indicator 🤔

Increasing unemployment means businesses are eliminating jobs. Businesses eliminate jobs when they need to reduce costs. The need to reduce costs is often due to falling demand for their products or services. Falling demand is an indication of an economic downturn.

History 📚

Attempts to gather employment data at the national level began as early as 1880. However, modern tracking began in 1937. This was part of a government effort to improve the data available to aid in public assistance after the great depression. The Sahm Rule was created in 2019 to help the government apply policy in support of the economy during downturns.

Performance ⚖️

The Sahm Rule, which is based on the unemployment rate, accurately identifies all recessions since 1950, with 2 false positives.

Additional info