No. of Recommendations: 7
Unemployment rises sharply during recessions, and then falls gradually during expansions. There are also long term trends in the UNRATE data. SAHMREALTIME cleans up the data, leaving the recession surges easy to see. Peak SAHMREALTIME occur near the end of a recession. SAHMREALTIME looks for rapid increases in unemployment, and ignores long-term trends.
VCI is a new indicator, and so has no post-discovery record. I don't see any advantage to VCI. Maybe just a marketing bit, or maybe the Yahoo artice is incorrect in saying a recession is indicated when:
Sahm Rule is "average unemployment rate over three months rises by 0.5% above its 12-month low"
VCI is "average unemployment rate over three months rises by more than 1% over the previous 12 months".
From these descriptions, VCI would signal later than the Sahm Rule.
=== links ===
Unemployment Rate (UNRATE)
https://fred.stlouisfed.org/series/UNRATE/Real-time Sahm Rule Recession Indicator (SAHMREALTIME)
https://fred.stlouisfed.org/series/SAHMREALTIMELabor Force Participation Rate (CIVPART)
https://fred.stlouisfed.org/series/CIVPART/Vicious Cycle Index (VCI) created in 2026
Moody's Analytics chief economist Mark Zandi and his team created the indicator... based the index on the Sahm Rule, developed by economist Claudia Sahm. The Sahm Rule signals that the economy is in the early stages of a recession when the average unemployment rate over three months rises by 0.5% above its 12-month low.
The VCI made two improvements to the Sahm Rule, making it more powerful. First, the index adjusts unemployment numbers using a five-year moving average of labor force participation. This helps capture workers who give up on finding a job and leave the workforce. Second, the VCI indicates that the economy is in recession when the average unemployment rate over three months rises by more than 1% over the previous 12 months.
The key to the VCI's greater accuracy compared to the Sahm Rule is that it factors in rising unemployment and lower workforce participation. This change helps it avoid false alarms that can flash when the labor market appears healthy but is actually weakening.
Moody's Analytics has raised its probability that the U.S. economy will enter a recession over the next 12 months to 48.6%. That's higher than EY-Parthenon's 40% chance and Goldman Sachs' (NYSE: GS) 30% odds of recession. However, those organizations don't use the VCI.
https://finance.yahoo.com/economy/articles/indicat...Moody's Economist Unveils 'Vicious Cycle Index' to Detect Looming Recessions, Apr. 11, 2026
Mark Zandi's new AI-powered metric aims to provide a more nuanced view of the job market beyond the standard unemployment rate.
https://nationaltoday.com/us/wa/seattle/news/2026/... 