Has the Recession Started?

Pascal Michaillat and Emmanuel Saez

Oxford Bulletin of Economics and Statistics, 2025, vol. 87, issue 6, 1047-1058

Abstract: This paper develops a new rule to detect US recessions by combining data on job vacancies and unemployment. We first construct a new recession indicator: the minimum of the Sahm‐rule indicator (the increase in the 3‐month average of the unemployment rate above its 12‐month low) and a vacancy analogue. The minimum indicator captures simultaneous rises in unemployment and declines in vacancies. We then set the recession threshold to 0.29 percentage points (pp), so a recession is detected whenever the minimum indicator crosses 0.29pp. This new rule detects recessions faster than the Sahm rule: with an average delay of 1.2 months instead of 2.7 months, and a maximum delay of 3 months instead of 7 months. It is also more robust: it identifies all 15 recessions since 1929 without false positives, whereas the Sahm rule breaks down before 1960. By adding a second threshold, we can also compute recession probabilities: values between 0.29pp and 0.81pp signal a probable recession; values above 0.81pp signal a certain recession. In December 2024, the minimum indicator is at 0.43pp, implying a recession probability of 27%. This recession risk was first detected in March 2024.

Date: 2025
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