The end of the recession? Key indicators to watch

It’s the question on everyone’s mind: When will the recession really bottom out? Every pundit has their own theory (and agenda) but these are the four key signals you should be watching for.

To get the most up-to-date data on how the economy’s doing — and what your business is likely to face next — keep an eye on these reports from the feds:

  1. Employment numbers — The headline-grabbing number is the household survey, but it can be misleading. It’s great for tracking the number of people employed, unemployed, in school, etc. But it doesn’t give the telling details, such as what percentage of people have stopped trying to look for work, or how many people are under-employed.
    A related employment report, the so-called establishment survey, tracks the number of people on company payrolls. That number gives better insight into where the overall economy is. Key to recovery: When job losses finally flatten, prepare for growth in the near future. Employment tends to be a lagging number in a recovery. Demand may pick up before employment numbers actually start to improve.
  2. New home sales — Doesn’t matter what industry you’re in, home sales in general are an important factor in economic growth. Every house sold means more furniture bought, home repair services contracted, etc. And that money circulates throughout the region.
    New home sales are of particular weight because the construction and sale of a new home pumps significantly more cash into the economy. Key to recovery: A significant uptick in new home sales in your region may indicate the worst is over in your neck of the woods. But different areas will peak/recover at different times. If the rest of the country is still in the doldrums, be prepared for more stormy weather.
  3. Personal income and outlays — This report tracks not only what consumers are making, but how and what they’re spending on, as well as how much they’re saving. It’s a vital glimpse into buyers’ wallets. More importantly, it tracks spending on both products and services so it gives a balanced view of the overall economy. Key to the recovery: Consumer spending is the engine of our economy, until that picks up, both B2C and B2B companies will face significant challenges.
    Note: The monthly retail sales report provides some similar data. But because it combines consumer spending with sales to smaller companies, it’s not always as reliable as an indicator. However, it comes out two weeks before the Personal income and outlays report, so it’s worth a look to get an earlier take on economy.
  4. Consumer price index — This is your standard measure of inflation, and it comes in two flavors: The overall CPI tracks all prices across industries. The core CPI excludes food and oil, due to their general price volatility. It’s worth keeping an eye on both CPI measures. While many media outlets focus on the core CPI, the products not tracked in the core CPI tend to be the ones consumers can’t afford to not buy. Heavy increases there can foreshadow decreased spending in other areas. Key to the recovery: While no one wants to see steep inflation, most experts agree deflation would be even worse and would prolong the recession.

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