US unemployment rise is on verge of triggering recession rule

THE rise in unemployment to 3.9 per cent last month means joblessness is on the verge of triggering the so-called Sahm Rule, which has proven to be reliable predictor of recessions in the past.

The rule, hatched by former Federal Reserve economist and now Bloomberg columnist Claudia Sahm, posits the start of a recession when the three-month moving average of the unemployment rate rises by a half-percentage point or more relative to its low during the previous 12 months.

The low for joblessness so far this year was 3.4 per cent. October’s rate was the highest so far this year, following two readings at 3.8 per cent in August and September – just shy of the 3.9 per cent level that would trigger the Sahm Rule.

Sahm, who heads her own consulting firm, has said she worried her creation has become “a monster.”

“If it was ever going to break it would be now, and I would be so happy to see it break,” Sahm said in an interview in August. BLOOMBERG