Quote:
Originally Posted by Derwood
Does one track recession via jobless rate (which has grown) or by National GDP (which is also up)?
Not a loaded question; I have almost zero knowledge of economics, so I'm curious which is the more accepted methodology
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Economists look at various things when tracking the business cycle. A recession is usually followed by a "trough" before going to a recovery.
Indicators, however, are generally divided by the delay between the indicator and the direction of the economy: leading (happens before the economy changes), coincident (happens at the same time), and lagging (happens after economic change).
Examples:
- Leading: housing spending index, commodity prices, S&P Composite Index
- Coincident: GDP change, personal income change, retail sales
- Lagging: unemployment rate and commercial inventory levels
So to answer your question, looking at GDP indicates what's happening to the economy
now, and looking at unemployment figures suggests what happened to the economy a while back. So the recent growth in GDP suggests the economy is currently growing, but the unemployment rate is still increasing, suggesting that the economy was receding a while back.
In a "trough," demand usually continues to drop, and so workers either continue to face layoffs or stalling income growth. But as demand is suppressed, so are prices, which keeps inflation at bay or even may result in deflation. Interest rates tend to remain low in this case, which encourages borrowing and spending. This eventually helps rebuild economic growth.
Quote:
Originally Posted by Rekna
Unemployment has always been a lagging indicator. That is we enter a recession and 6 months to a year later unemployment goes way up. Once we leave the recession it usually takes 6 months to a year for the jobs to recover.
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Yes, exactly.