How do you know a recession is coming—or that you’re in one?
Unemployment rate U-3: The official number
How many people from the labor force are not currently employed? In percent, that’s the headline figure you see on TV, and that usually governments talk about.
It’s a bit of a cheat because if half the population changes from full-time to part-time U-3 wouldn’t change … and clearly that wouldn’t be a great thing for the economy.
Read more about how governments calculate the official unemployment rate, it’s shortcomings, and how to get the data for various countries.
Producer Price Indexes (PPI)
How much did prices for products & services change? Not just retail prices, but wholesale, too. That’s what the various PPI indices tell you.
And because prices are sticky—they go down only in extreme circumstances—the PPI is not great at predicting a recession, but it is useful as an economic gauge.
Read more about the PPI.
Need to know how the global economy is doing? Ask Doctor Copper!
For decades the price of copper has been seen as a reliable, leading indicator for economic activity.
Why? Because copper is widely used across the economy. So, if demand for copper falls that likely isn’t just one industry being in trouble.
Even Doctor Copper isn’t a perfect economic indicator though.
Read more about the copper price indicator.
If you want to learn more about housing market indicators, dig into this blog post here.
Tea leaves and (unexplained) correlations
Annoyingly intelligent people remind us that “correlation isn’t causation”. Thing is: our brains kinda love correlation. That’s why our brains conspired against the annoyingly intelligent people and came up with indicators that are much more fun than the scientific joykill above.
When the Phillies win the World Series, brace for impact. It’s been true before, it’s gotta be true now!
Learn more about the Philadelphia basketball indicator.