3 Lagging Economic Indicators that Ought to Look For
A lagging indicator is a statistic that follows an economic event. You use it to confirm what just happened in the economy and build a trend. It makes this indicator very useful for identifying turning points in the business cycle.
The best way to use lagging indicators is along with two other types. The first is the leading indicator. This includes stock prices, manufacturer orders for durable goods and interest rates.
These indicators predict a new phase in the business cycle. You should also look at coincident indicators, such as gross domestic product (GDP) and employment. Both tell you what is happening right now.
Most people ignore or do not want to be bothered by lagging indicators. But that’s wrong. The lagging indicators help you make sure you read the trends correctly. That way you will know that the economy has been heading into a recession and when it will end. Here are 3 lagging indicators that must be considered:
Dow Jones Transportation Average is a useful lagging indicator. Because it tracks the performance of shares of companies that deliver goods to the entire US state. Once producers meet durable goods orders, they must ship them to customers. There is a pause between order and delivery. If the Transport Index rises, that means customers do not cancel their orders. It confirms that Durable Goods Order Report as a leading economic indicator.
Unemployment. Once people start losing their jobs, the economy is starting to decline. That’s because the last thing an entrepreneur wants to do is let the workers or employees go. Unemployment will also continue to rise even after the economy begins to improve. That’s because companies wait until they believe the economy has recovered before they start recruiting again.
Consumer Confidence Index. That’s because most people do not feel that the economy has changed until it’s real. People will start to feel something about the economy with how easy it is to get a job. Usually, it is not difficult to find a job until the economy turns negative.