Index and List of Lagging Economic Indicators
U.S. Conference Board establishing Lagging Indicator Indices for the federal government. This is a nonprofit institution that publishes Index every month. It calculates the weight of seven lagging indicators to create the index. The Council uses indicators set by the National Economic Research Bureau (NBER). His research identified them as the best business cycle phase.
List of Lagging Economic Indicators
Here’s a list of US Conference Board indicators that are the most comprehensive list that economists follow:
Average Duration of Unemployment. Number of weeks counted as unemployed by the Bureau of Labor Statistics looking for work. During the recession, the number of long-term unemployed will increase. Weight index = 0.0361
Inventory Ratio to Sales. The Bureau of Economic Analysis calculates this for manufacturing, wholesale, and retail companies. During the recession, inventories rise as sales decline. Weight index = 0.1211
Changes in Labor Cost per unit of Manufacturing Output. This number increases when factories produce much less per employee, because orders are slower. The only way to reduce this amount is to lay off workers or generate more. Weight index = 0.0587
Average Prime Rate. When times are good, banks refuse to lower interest rates (and their profits) even if the business starts to slow down. When times are bad, they refuse to raise interest rates until they are confident the request supports them. Weight index = 0.2815.
Commercial and Industrial Loans. This is a lagging indicator because the bank still has many loans in a condition after the recession started. Similarly, businesses that lose revenue in the early stages of a recession will take out a loan to cover costs. Once the economy begins to improve, it takes a while before the bank has enough liquidity to start lending back. Weight index = 0.0970.
Ratio of Consumer Debt to Revenue. Consumer debt statistics are prepared by the Federal Reserve. Personal income is reported by the Bureau of Economic Analysis. After the recession, consumers carefully curbed debt accumulation even as their income began to rise. Instead, they will borrow more during the recession to pay bills when they are dismissed. Weight index = 0.2101.
Consumer Price Index for Services. This is part of the Consumer Price Index. Service providers can raise prices early in the recession to maintain profit margins due to intermittent demand. Once the recession hit, they were forced to cut costs and lower prices. They may continue to cut prices even after recovery begins. Those who survived after the recession tended to continue to lower prices. They keep trying to get more business because it works. They do not know when the recession is over. Weight index = 0.1955.