Last week a plethora of economic data was released. It is the job of the investor to determine which statistic is more important and what to look for in the data that might help in determining the future direction of the economy. Essentially an investor is looking for evidence of the next recession, an imperfect and difficult task. Stock markets become more volatile before a trend change in direction, and they always fall into a bear market before clear evidence of a recession is on the way.
Therefore, leading economic indicators are much more important than lagging. For instance, last week’s job report is a lagging indicator; it reported on data that is a month old, but this morning’s jobs opening report is a leading indicator. A strong jobs opening report tells us there is lots of work needed in the economy and employers are trying to hire the workers. That is an indication of a strong economy. Today we have more job openings than we have unemployed workers.
The economy may have weakened but is still not in danger of falling into a recession if the reading of the economic statistics is correct.