The index of leading indicators consists of ten variables of economic forecasting have a tendency to turn up before an expansion

The index of leading indicators consists of ten variables of economic forecasting have a tendency to turn up before an expansion

Rebecca ClineTuesdayMay 18 at 5:49am

The index of leading indicators consists of ten variables of economic forecasting have a tendency to turn up before an expansion and turn down before a recession (Gwartney, et al., 2018). Length of work week, manufacture’s new orders, weekly claims for unemployment, slower supplier deliveries, new housing permits, contracts and orders for capital equipment, interest rate spread, customer expectations, change in money supply, and change in 500 common stock price indexes are the trends that are charted by these ten variables (Gwartney, et al., 2018).

A.W. Phillips developed the Phillips curve, which portrays the relationships between unemployment and inflation. The Phillips curve specifically shows that when inflation rises, unemployment drops and the other way around as well (Gwartney, et al., 2018). There was a flattening of the curve after 1970, which has led to a division of economists over the validity of the concept (Reinbold & Wen, 2020). Reinbold and Wen go on to state that when longer periods of time are analyzed, the Phillips curve is still useful (2020).

Short term changes in inflation rate do not lead to an immediate unemployment rate change (Reinbold & Wen, 2020).

As a business person, you could use this predictive macroeconomics information to help make business decision by looking at indicators that pertain to your market. In the senior living industry, we compare our data to that in the local market. Having market data allows our company to be able to compare trends to our current data and can be helpful with predictive analysis.

Resources

Gwartney, J. A., Stroup, R. L., Sobel, R. L., & Macpherson, D. A. (2018). Macroeconomics: Private and public choice (16th ed.). Retrieved from https://www.cengage.com (Links to an external site.)

Reinbold, B., & Wen, Y. (2020). Is the Phillips Curve Still Alive?. Federal Reserve Bank of St. Louis. https://files.stlouisfed.org/files/htdocs/publications/review/2020/05/01/is-the-phillips-curve-still-alive.pdf