What Happens to IG Credit (LQD) When the Sahm Rule Exceeds 1.0?
The Sahm Rule triggers recession alerts when unemployment rises 0.5 points. What happens when it exceeds 1.0, signaling a deepening downturn?
How IG Credit (LQD) Responds
Scenario Background
The Sahm Rule identifies recessions in real time: when the three-month moving average of unemployment rises 0.5 percentage points or more from its 12-month low, the economy is already in recession. A Sahm value exceeding 1.0 indicates a severe acceleration in unemployment, historically signaling not just recession onset but a deepening downturn.
Read full scenario analysis →Historical Context
The Sahm Rule has accurately identified every recession since 1970 with no false positives at the 0.5 threshold. Values exceeding 1.0 occurred in every recession from 1970 onward: 1974 (2.0 peak), 1980 (2.0), 1981-1982 (2.5), 1990 (1.8), 2001 (1.3), 2008-2009 (4.5), and 2020 (11.0 peak during COVID). The 1981-1982 recession showed Sahm reach 1.0 in July 1981 with unemployment at 7.2%, peaking at 10.8% in November 1982. The 2008 Sahm crossed 1.0 in October 2008 with unemployment at 6.5%; unemploy...
What to Watch For
- •Continuing claims rising above 2.0 million alongside Sahm exceeding 1.0
- •Unemployment rate rising above 4.5% with Sahm-rule acceleration
- •Initial claims above 300,000 weekly confirming layoff acceleration
- •Fed shifting to 50 bp cuts or inter-meeting actions
- •Job openings (JOLTS) falling below nonfarm payrolls level
Other Assets When the Sahm Rule Exceeds 1.0
Other Scenarios Affecting IG Credit (LQD)
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