Sahm Recession Indicator: A Harbinger of Economic Downturn
What is the Sahm Recession Indicator?
The Sahm Recession Indicator, formulated by Federal Reserve economist Claudia Sahm, is an economic metric used to predict the onset of a recession. When the three-month moving average of the national unemployment rate (U3) rises significantly, it is considered a potential indicator of economic contraction.
How Does it Work?
The Sahm Rule focuses specifically on the U3 unemployment rate, which includes individuals who are actively seeking employment but have not yet found work. The three-month moving average smoothes out short-term fluctuations in the data, allowing for a more stable depiction of the overall trend. When the moving average surpasses a predetermined threshold, it suggests a potential economic downturn.
Current Status
As of [Date], the Sahm Recession Indicator has signaled a potential recession. The three-month moving average of the U3 unemployment rate has risen steadily in recent months, reaching [Value]%. This indicates that the economy may be entering a period of economic contraction.
Implications
The Sahm Recession Indicator serves as an early warning system for policymakers and market participants. It provides valuable insights into the health of the economy and helps prepare for potential economic headwinds. By closely monitoring this indicator, investors and businesses can make informed decisions and adjust their strategies accordingly.
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