Episode
How Central Banks Use the Sahm Rule to Trigger Recession Alerts
- Published
- Jun 29, 2026
- Duration seconds
- 618
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Summary
Episode 81 of Monetary Policy Explained dives into the Sahm Rule, a real-time recession indicator developed by former Fed economist Claudia Sahm. Lucas and Luna break down how this rule works—triggering when the three-month average unemployment rate rises half a percentage point above its 12-month low—and why it has caught the attention of central bankers in 2026. They explore its track record, including how it signaled every US recession since the 1970s without false alarms, its role in the Fed's policy toolkit, and why some economists caution against relying on a single rule. The hosts discuss how the Bureau of Labor Statistics released the May 2026 jobs report on June 5, showing the three-month average unemployment rate at 4.0 percent, exactly 0.5 points above the low of 3.5 percent from early 2025, flirting with the Sahm trigger. They also touch on the rule's limitations for structural shifts like the post-pandemic labor market. A concrete, timely look at how a simple statistical rule shapes central bank thinking. #SahmRule #ClaudiaSahm #FederalReserve #RecessionIndicator #UnemploymentRate #MonetaryPolicy #Economics #CentralBanking #BusinessCycle #LaborMarket #BureauOfLaborStatistics #May2026JobsReport #FOMC #RealTimeIndicator #PolicyTrigger #FexingoBusiness #BusinessPodcast #Macroprudential Keep every episode free: buymeacoffee.com/fexingo