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Recession signal: Unemployment nears Sahm Rule trigger

December 03, 2025

Markets are gearing up for renewed focus on the Sahm Rule1 as unemployment inches closer to its trigger threshold. Despite September’s surprise with nonfarm payrolls rising by 119k versus consensus estimates of 53k, downward revisions to prior months totaling 33k2 highlight that job growth remains modest. “If the recent pace of increases continues, we could see the Sahm Rule activate by early February, and this time it’s for non-benign reasons tied to weakening labor demand,” says Garrett Melson, Portfolio Strategist, Natixis Investment Managers Solutions.

Sahm Rule (12/31/1959 – 09/30/25)

Source: Bloomberg

  • We’re 43 basis points shy of the Sahm Rule trigger threshold, which could be reached by the January payrolls report if the current pace of 0.054% monthly increases continues, Melson points out.
  • While the Sahm Rule is an empirical observation and not a law of nature, it remains a key signal for recession risk.
  • Unlike last year’s false alarm, this potential trigger reflects demand-driven weakness, not supply-side distortions.

1 The Sahm Rule is an empirical recession indicator that signals risk when the three-month average unemployment rate rises by 0.5 percentage points above its 12-month low.

2 U.S. Bureau of Labor Statistics, November 2025.

This material is provided for informational purposes only and should not be construed as investment advice. The views and opinions contained herein reflect the subjective judgments and assumptions of the authors only and do not necessarily reflect the views of Natixis Investment Managers, or any of its affiliates. The views and opinions expressed may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted, and actual results may vary.

All investing involves risk, including the risk of loss. Investment risk exists with equity, fixed income, and alternative investments. There is no assurance that any investment will meet its performance objectives or that losses will be avoided. Investors should fully understand the risks associated with any investment prior to investing.

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