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Difficulty: EasyEconomic Indicators and Business Cycle Phases

Match each macroeconomic metric to its correct indicator classification relative to the business cycle.

  • Average duration of unemploymentLagging indicator
  • S&P 500 Index equity pricesLeading indicator
  • Employees on nonagricultural payrollsCoincident indicator

Answer

Average duration of unemployment matches with Lagging indicator; S&P 500 Index equity prices matches with Leading indicator; Employees on nonagricultural payrolls matches with Coincident indicator.
S&P 500 equity prices predict future economic turns (leading), nonagricultural payrolls measure current economic output (coincident), and the average duration of unemployment confirms shifts that have already taken place (lagging).

Step-by-Step Solution

1
Determine the timing of changes in the average duration of unemployment.
Unemployment duration changes after the general economy has already entered a recession or expansion.
Metrics that react after aggregate economic shifts are classified as lagging indicators.
2
Determine the timing of changes in the S&P 500 Index.
Equity markets anticipate economic changes prior to shifts in broader macroeconomic output.
Metrics that change direction before the general economy shifts are classified as leading indicators.
3
Determine the timing of changes in nonagricultural payroll employment.
Employment levels move in tandem with overall real output and aggregate demand.
Metrics that move concurrently with the business cycle are classified as coincident indicators.

Key Concept

Categorization of key macroeconomic metrics into leading, coincident, and lagging economic indicators.
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Topics

Economic Indicators and Business Cycle Phases

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