Conversation Starter: Unemployment Rising Sharply in Nearly 1 in 5 Metros

The unemployment rate increased to 3.8 percent in August from 3.5 percent in July according to data released last week by the Bureau of Labor Statistics. It is now up 0.4 percentage points from the historic lows reported in January and April 2023.

In some communities, the increase over the past few months has been much larger. According to one commonly referenced guide – known as the Sahm Rule – a good predictor of recessions is when the national unemployment rate increases by 0.5 percentage points or more from its 12-month low.

A growing number of U.S. metro areas have crossed this psychologically-significant threshold in recent months – including several major tech industry hubs like San Francisco and San Jose, CA and Austin, TX. As of July 2023, 19 percent of the 390 largest U.S. metro areas – home to 24 percent of U.S. workers – have seen the local unemployment rate increase by at least 0.5 percentage points over the past year.

While a rapid increase in the share of metro areas meeting the criteria of a Sahm-Rule Recession is unusual, it is not unprecedented: It also increased to a similar peak before retreating during the 1994-95 “soft landing” when the Federal Reserve managed to increase interest rates without sparking a broader recession.

Conversation Starters are a periodic series of charts and data points from Glassdoor’s Economic Research team aimed at sparking conversations on timely trends in employee satisfaction, workplace community, the future of work, and the labor market more broadly.

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