The Sahm Rule Recession Indicator (unemployment increasing more than .5 percent based on a moving average) admittedly caused quite a stir in recent weeks. Real-time Sahm Rule Recession Indicator (SAHMREALTIME) | FRED | St. Louis Fed (stlouisfed.org), which leads me to saying a bit about my own modeling efforts with unemployment and panic about recession or not.
My own modeling efforts do use unemployment as an effort to understand if we’re in a recession that should be influencing model expectations. However, I use a grayscale s-curve concept rather than a strict binary variable that flips at .5% or a similar change in the unemployment rate. Thus, my modeling thinks that the likelihood that we’re in or near the cusp or a recession is meaningfully higher than before the most recent BLS jobs report, but it is very unlikely to flip completely on or off like a light switch from one job report to the next.