The Sahm Rule is a recession indicator that was developed by economist Claudia Sahm. It is based on the idea that changes in the unemployment rate can be used to identify the onset of a recession. The rule states that if the three-month moving average of the unemployment rate increases by 0.5 percentage points or more above its three-month moving average low for the previous year, it is considered a recession signal. The indicator is considered simple and quick to use, and has shown to be a reliable indicator of recessions in the past.
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