XM.com - Trade Forex with up to 1:500 Leverage and up to $5000 Bonus.
FXRank technical section offers a profound and in-depth text and video Forex and Commodities technical analysis reports done by professional analysts with a great understanding of the market
Advertisement InstaForex

A Simple Leading Indicator of the US Economy

Written by By Valeria Bednarik | 2019-03-13 12:58:00 GMT

Why should one care?

Simply put, the unemployment rate is a good predictor of recessions. Over the last three recessions, the unemployment rate moved higher in the period prior to the downturn, while it moved downwards between recessions. Why do we just focus on the last three recessions when it appears to work for at least one other as the image above suggests? The answer is that in the 1970s and 1980s recessions were not domestically-originated events but were more related to external (oil price) shocks. Thus, the comparison would not be correct.

Note that when extracting a recession signal from the above indicator it does not mean that traders should panic every time the unemployment rate increases a bit. These occasional, one-off events will likely not be correlated with the overall movement but, as the figure shows, they will always be present in the data. Furthermore, it is usually the case that unemployment rises in the aftermath of a crisis, and thus this should not be considered as a sign for further deterioration, but as a signal for a labour market delay in adjustment.

What does the indicator currently suggest?

Simply put, the indicator does not suggest, at the moment, any signs of deterioration in the US economy, as increases appear to have been just one-off events. At the moment, despite the unemployment rate increase to 4% in January, likely the result of the US government shutdown, the rate is at lows, with no signs of moving upwards. Thus, there does not appear to be any recession indication, at least at the moment. Still, given that the rate has been fluctuating in the 3.8%-4% area for a while, perhaps it  could be interpreted as a sign of a slowdown.

Fred

Author

By Valeria Bednarik
XM

Start Trading With Top Industry Brokers

Broker Profile Open Account
XM
  • Minimum Deposit: 5 USD
  • Leverage of up to 1:30
  • Leverage applies to all EU regulated entities of the group. Leverage depends on the financial instrument traded.
  • Broker Type : Market Maker
  • Regulation : CySEC,ASIC, FCA
  • XM
    FBS
  • Offer: 50USD No Deposit Bonus
  • Offer: 100% Deposit Bonus
  • Minimum Deposit: 1 USD
  • Leverage of up to 1:500
  • Broker Type : Market Maker
  • Regulation : CRFIN (Russia), 009069697 IFSC (Belize), IFSC/60/230/TS/12
  • FBS
    Tickmill
  • Offer: 30USD No Deposit Bonus
  • Minimum Deposit: 25 USD
  • Leverage of up to 1:500
  • Broker Type : ECN/STP & STP
  • Regulation : FSA SD008
  • Tickmill

    The Best Crypto to Crypto

    Exchanger Advantages Open Account
    binance
  • Safety Stability: Multi-tier & multi-cluster system architecture
  • Binance charges a quite low commission fee
  • Multiple-Coin Support : BTC, ETH, LTC, BNB...
  • High Liquidity
  • Multiple-Language Support
  • binance
    changelly
  • Instant cryptocurrency exchange
  • More than 500,000 satisfied users
  • Changelly charges a quite low commission fee
  • Safety Stability
  • changelly
    bitmex
  • Bitmex - Bitcoin Mercantile Exchange is a cryptocurrency derivatives trading platform.
  • Bitmex charges a quite low commission fee
  • Safety Stability
  • changelly

    Best Brokers to Trade Crypto

    Broker Profile Open Account
    XM
  • Minimum Deposit: 5 USD
  • Leverage of up to 1:30
  • Leverage applies to all EU regulated entities of the group. Leverage depends on the financial instrument traded.
  • Broker Type : Market Maker
  • Regulation : CySEC,ASIC ,FCA
  • XM
    FBS
  • Offer: 50USD No Deposit Bonus
  • Offer: 100% Deposit Bonus
  • Minimum Deposit: 1 USD
  • Leverage of up to 1:500
  • Broker Type : Market Maker
  • Regulation : CRFIN (Russia), 009069697 IFSC (Belize), IFSC/60/230/TS/12
  • FBS
    eToro
  • Offer: 1000USD Deposit Bonus
  • Minimum Deposit: 50 USD
  • Leverage of up to 1:400
  • Broker Type : STP
  • Regulation : ASIC, 335692 CFTC/NFA, 0382918 CySEC, 109/10
  • eToro

    Contact us
    fxrank.net@gmail.com