What is the Sahm Rule and when will it trigger?

The Sahm Rule signals a recession when the three-month average unemployment rate rises 0.5 percentage points above its 12-month low. It is currently at 0.43 and could trigger soon.

What is Moody's Analytics' recession forecast for the US?

Moody's Analytics estimates a 40% probability of an economic contraction in the United States next year, an outlook slightly above the Wall Street consensus.

How might AI impact the US labor market?

While AI's impact has been modest, future productivity gains from AI adoption could significantly alter the labor market, potentially leading to job decline if businesses see increased profitability.

Home / Business and Economy / US Economy on Recession Precipice?

US Economy on Recession Precipice?

19 Dec, 2025

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Summary

US unemployment rate reached 4.6% in November, nearing a recession trigger.
Moody's Analytics estimates a 40% chance of US economic contraction next year.
Factors like immigration policy and AI's future impact may influence job growth.

The American labor market is showing signs of slowing, with the unemployment rate in November edging up to 4.6%. This figure, while not dire, represents an increase from the previous year and is concerning economists due to the ongoing trend. Analysts at Moody's Analytics are closely watching the Sahm Rule, a recession indicator that is on the verge of being triggered.

Moody's chief economist Mark Zandi and senior director Dante DeAntonio noted that the U.S. is close to activating the Sahm Rule, which signals a recession when the three-month average unemployment rate rises by 0.5 percentage points. Currently at 0.43, it could be triggered next month if unemployment remains stable. This has led Moody's to estimate a 40% likelihood of an economic contraction in the coming year.

Concerns extend beyond the unemployment rate itself. Stagnant job growth, potentially linked to labor supply issues stemming from immigration policy, coupled with the long-term implications of AI on productivity and employment, contribute to economic uncertainty. Investors are anticipating significant AI adoption, which could lead to substantial productivity gains and profitability, potentially impacting job numbers.