The job market often shows slower responses to changes in economic growth, with the unemployment rate typically lagging behind for several months.
Nationwide chief economist and senior vice president Kathy Bostjancic joins Wealth host Julie Hyman to explain how the unemployment rate acts as a lagging indicator, while payroll data provides a more immediate reflection of labor market conditions.
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And and Kathy, we tend to talk about jobs as a lagging indicator, right? That they slow more slowly or with a lag to what happens with economic growth. How should um people who are watching the job market think about that? What's the typical lag and how does it usually sort of play out?
Yeah, that that that's a great point. Um, I would say the unemployment rate is is a lagging indicator. Um, and that could be, you know, several months to you know, maybe six months of a lagging indicator. Um, the the establishment, the payroll data that we get as well, I would say call that more coincident. Um, and that's a reflection what's the labor market now. And it really becomes coincident because we'll get that data on Friday and then we'll look at the wage growth and we'll make an estimate of what we think personal income growth will be uh for for March or any given month. And then we can project, okay, that's going to support or maybe hurt consumer spending in in the current in the current month. So it becomes a very coincident indicator in that sense, but yes, the unemployment rate tends to be a lagging. That's because you you have changes in labor supply. So it's not just um the number of people employed, but it's also the number of people coming into the labor force, you know, looking for a job.
