The “SAHM” rule is named for economist, Claudia Sahm.
The national U.S. unemployment rate rose to 4.3% in July, the highest since 2021. It also marked another milestone. According to the Sahm indicator, the U.S. economy is now in recession. The Sahm indicator says that if the three-month average unemployment rate rises by more than a half percentage point above the lowest three-month average for the previous 12 months, then the economy is in recession. By this measure, the Sahm indicator hit 0.53 in July.
The unemployment rate for July in the Augusta Metropolitan Statistical Area just came out last week. It hit 4.1%, the highest since May 2021. However, the increase does not trigger the Sahm indicator in Augusta, it only being 0.4.
Other national indicators of recession are contradictory. The second quarter growth rate of Gross Domestic Product was a robust 3.0%. The jobs market generated 114,000 jobs in July, clearly a slowdown from previous months, but not recessionary. One indicator that is indicating recession is the yield curve, the difference between the interest rate on 10-year treasuries minus the interest rate on 2-year treasuries. The yield curve has been negative for two years and an inverted yield curve has always preceded a recession since the 1980’s. Ominously, the inverted yield curve turned positive just before the last four recessions, and on August 28th, the difference between 10-year treasuries and 2-year treasuries was 0.01 percent.
