What are leading indicators and lagging indicators?
A. Economists consider lots of data when they measure they health of the U.S. economy. But not all of the gauges are evident at the same time. Some warning signs show up at the very beginning of a recession. Some are evident only after a recession is well under way. The same holds true for a recovery or expansion, which is a period of increasing economic activity. Some things, such as inventory levels, are a leading indicator. Let’s say warehouses are filled to the ceiling with unsold easy chairs, dishwashers and truck tires. Those products’ manufacturers are probably going to cut workers’ hours and maybe eliminate some jobs – at least until demand picks up. High inventory levels indicate a recession could be beginning – or might already be in progress. Employment levels are considered a lagging indicator because most businesses don’t cut jobs the moment customer demand weakens. Companies typically want to keep experienced workers if there’s any chance orders might pick up. Once a rece
