“They’re not concerned with today, they’re looking ahead.”
“Major stock indices are forward-looking predictive patterns,” he said. Walter Zimmermann, chief technical analyst at trading firm ICAP, agrees that the markets can be analyzed as future economic indicators. The problem is, the stock market predicts way more recessions than actually happen.” “So the stock market can predict recessions. “It’s real-time data - people are putting their money where their mouth is right as they’re feeling it,” she said. Stevenson said financial market data like the S&P 500 are more useful for predicting future performance, as investors try to anticipate upcoming earnings and economic growth. They think, ‘there’s a chance things might turn out well.’” “So even when things start slowing down,” she said, “people like their employees so they don’t immediately start laying people off. Stevenson points out that the monthly job creation and unemployment numbers are lagging indicators. When unemployment is very low and employers start to have trouble finding qualified workers, they invest more in labor-saving technology. Those measures are important because when people have jobs, and can find jobs easily, it drives more consumer spending, home construction, auto production, vacation travel and the like. Gross Domestic Product (GDP), Gross Domestic Income (GDI) (see here), nonfarm payrolls and the unemployment rate (from the monthly employment report here), initial weekly unemployment claims (see here), consumer sentiment (see here), business confidence (see here), Consumer Price Inflation (CPI) (see here), the Employment Cost Index (ECI) (see here), and the S&P 500 ( see here).įour of Stevenson’s top stats track employment or the likelihood that businesses will hire. She tracks ten economic statistics closely: I’m wondering which regularly reported economic data are the most reliable predictors of future economic performance?īetsey Stevenson served as chief economist in the Labor Department under President Barrack Obama, and now teaches at the University of Michigan. Listener Melanie Cost Young, from Jacksonville, Florida, asked Marketplace this question: Ever wondered if recycling is worth it? Or how store brands stack up against name brands? What do you wonder? Let us know below.
This is just one of the stories from our “I’ve Always Wondered” series, where we tackle all of your questions about the world of business, no matter how big or small.
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