DiMartino Booth points out McKelvey Rules, which uses a 0.3 ppt threshold instead of the Sahm 0.5 ppt threshold. This indicator does appear to be signaling a recession, as shown in the chart below.
source: DiMartino Booth(2024).
Note that there are no false negatives. However, this figure (obviously) uses revised data. Instantly, one gets a different set of results, as shown in Figure 1 below.
figure 1: The current 3-month moving average unemployment rate in ppt relative to the lowest unemployment rate in the previous 12 months (blue). NBER-defined recession peak-to-trough dates are in gray. source: fredNational Bureau of Economic Research.
Using live data, there are three false positives (green circles).So when real time Although the indicator uses a 0.3 percentage point threshold to indicate a recession, it is important to recognize that the indicator has produced false positives.
