Economy Data Releases and Leading vs. Lagging Indicators

New economic data for the U.S. economy is released almost every day, but data is released with a lag: Much of the upcoming data releases are for economic activity in February, or even as late as 2019Q4 (third, revised release of 2019Q4 GDP estimates). Most U.S. economic data doesn’t yet show a collapse in economic activity, in part because of these data availability lags. If you’re curious about upcoming data releases, here’s the NY Fed’s Economic Indicators Calendar. And here’s a similar calendar of economic data releases with median forecasts via MarketWatch.

The data release that economists are fixated on this week is Thursday’s weekly report on initial unemployment insurance claims (also referred to as “Initial claims” or “Weekly jobless claims”):  Many forecasts have the jumping roughly an order of magnitude, from 281k last week to 2-3 million this week. 

Initial unemployment insurance claims are a leading economic indicator, meaning that they deteriorate before a downturn is visible in GDP. Coincident economic indicators deteriorate at the same time as GDP (e.g., personal income). Lagging economic indicators deteriorate after a downturn in GDP (e.g., the unemployment rate). During the Great Recession, the U.S. unemployment rate peaked at 10% in October 2009, whereas the U.S. economy had already hit a trough in June 2009 and GDP was (slowly) recovering. (Here are the NBER recession/expansion business cycle peak/trough dates.) 

The Bureau of Labor Statistics’ (BLS) jobs report for March won’t come out until April 3. And it will be the jobs report for April, released in early May, that will likely be the jaw-dropper (data for the first full month after quarantines and social distancing began). So we’ll see a deterioration in the labor market in initial UI claims well before we see it in the monthly BLS jobs reports.

The Conference Board produces a Leading Economic Index to aggregate various leading economic indicators for the U.S. economy. The data inputs for their Leading Economic Index are:
  • Average weekly hours, manufacturing (hours typically get cut before layoffs)
  • Average weekly initial claims for unemployment insurance (UI)
  • Manufacturers’ new orders, consumer goods and materials
  • The Institute for Supply Management (ISM) Index of New Orders (new manufacturing orders)
  • Manufacturers’ new orders, nondefense capital goods excluding aircraft orders
  • Building permits for new private housing units (permits lead new construction, residential investment)
  • Stock prices (S&P 500)
  • The Conference Board’s Leading Credit Index (measure of credit conditions)
  • 10-year Treasury yield less the federal funds rate (risk-free credit spread)
  • Index of consumer expectations for business conditions
The Conference Board’s Leading Economic Index also comes out with a lag: They just released their index for February last week, which still showed an expansion in U.S. economic activity.

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