Financial encyclopedia

Sam's law predicts economic recession

To know whether the economy will fall into recession, since 1970, there has been a 100% accurate measurement index called Sam's Law, which has not been missed so far. The Sam's Law was discovered by Claudia Rae Sahm, the current chief economist of the Federal Reserve:

What is Sam's Law?

She found that when the three-month moving average of the unemployment rate in the United States, minus the low unemployment rate of the previous year, exceeds 0.5%, it means that the economy is going through a recession stage, which is consistent with this situation in every recession stage in the United States since 1970. Therefore, the indicator was named Sam's Rule recession indicator (Sam's Law).

Shortcomings of Sam's rule decline index;

Overprediction:

Sam's rule recession index is 100% accurate, but since the 1960s, it has predicted 13 economic recessions, but actually there are only 9 recessions.

Delay:

Four of the recent recessions were predictions; Two times occurred almost simultaneously with the economic recession; Once it was even behind the economic recession.

Is the great recession coming?

According to Sam's Law, as of December 2023, this figure has increased by 0.23 percentage points, indicating that the United States is extremely unlikely to have fallen into recession.