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A better Sahm rule? Introducing the SOS recession indicator

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  • O'Trakoun, John
  • Scavette, Adam

Abstract

We introduce a new recession indicator based on the Sahm rule methodology. The Scavette-O'Trakoun-Sahm-style (SOS) indicator uses the insured unemployment rate to correctly signal the past seven recessions since 1971. Additionally, our analysis suggests that the SOS improves upon the Sahm rule such that it has fewer (none) false positives and identifies recessions faster on average. Additionally, the SOS rule benefits from being available at a higher frequency (weekly) than the Sahm rule (monthly) and not subject to several sources of sampling bias such as incorrect responses or nonresponse. This suggests that the SOS indicator may be a desirable alternative for users of the Sahm rule: economists, journalists, and policymakers.

Suggested Citation

  • O'Trakoun, John & Scavette, Adam, 2025. "A better Sahm rule? Introducing the SOS recession indicator," Economics Letters, Elsevier, vol. 247(C).
    • Handle: RePEc:eee:ecolet:v:247:y:2025:i:c:s0165176525000126
    DOI: 10.1016/j.econlet.2025.112175
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    References listed on IDEAS

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    1. Michaillat, Pascal & Saez, Emmanuel, 2024. "Has the Recession Started?," Santa Cruz Department of Economics, Working Paper Series qt0h0295t7, Department of Economics, UC Santa Cruz.
    2. Adam Scavette, 2014. "Are we in a recession? The 'anxious index nowcast' knows!," Research Rap Special Report, Federal Reserve Bank of Philadelphia, issue Dec.
    3. Andreas Hornstein, 2022. "Recession Predictors: An Evaluation," Richmond Fed Economic Brief, Federal Reserve Bank of Richmond, vol. 22(30), August.
    4. Ash, Thomas & Nickelsburg, Jerry, 2024. "Works like a Sahm: Recession indicators and the Sahm rule," Economics Letters, Elsevier, vol. 242(C).
    5. Robert Bernhardt & Phanindra V. Wunnava, 2023. "Does asking about citizenship increase labor survey non-response?," Journal of Population Economics, Springer;European Society for Population Economics, vol. 36(4), pages 2457-2481, October.
    6. Andreas Hornstein, 2023. "Unemployment Changes as Recession Indicators," Richmond Fed Economic Brief, Federal Reserve Bank of Richmond, vol. 23(13), April.
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