Lagging Indicators
Economic data points that change after the broader economy has already shifted.
What is Lagging Indicators?
Lagging indicators are economic statistics that change after the economy has already begun following a new trend. They confirm that a shift has occurred rather than predicting it. Common lagging indicators include: the unemployment rate, average duration of unemployment, commercial and industrial loans outstanding, the consumer price index (CPI), and the prime lending rate. Despite their backward-looking nature, lagging indicators are valuable because they confirm that the economic picture has genuinely changed — reducing the risk of misinterpreting temporary fluctuations in leading indicators. The Conference Board maintains a Composite Index of Lagging Indicators alongside its leading and coincident indices.
Example
The US unemployment rate is a classic lagging indicator: during the 2008–2009 recession, unemployment continued rising for months after GDP had bottomed and started recovering, not peaking until October 2009 — well after the recession officially ended in June 2009. Employers are reluctant to hire until confident the recovery is sustained.