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Evaluation of Unemployment as a lagging indicator

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The unemployment rate is a misleading indicator of the current and future state of the economy. How does the timing of lay-off and hiring decisions made by firms explain the misleading characteristic of this indicator?

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This explains the evaluation of unemployment as a lagging indicator.

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An indicator is anything that can be used to predict future financial or economic trends. Popular indicators include unemployment rates, housing starts, inflationary indexes and consumer confidence. Leading indexes are designed to turn a few quarters ahead of coincident indexes that describe current economic activity whereas the index of lagging indicators, a measure ...

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