Economic Indicators
Okay, I should pay attention to the
business cycle, but how do I know
which direction it is going in?
Economics Joke:
•
There are only two economists in the
world know where the economy is going.
nd they disagree!
I" you were an economist, this would be
hilarious! #or the rest o" us, not so "unny.
$ut, it tells us one thing: economics is
unpredictable. %e can only guess at what is
happening.
Economic Indicators
•
&redicting the business cycle is tricky.
O"ten the economy does not do what
economists e'pect. (ooking at lots o"
indicators gi)e them a "eel "or what is
going on and an idea o" how to prepare "or
the "uture.
•
*e". Trends in the economy which tell
economists where the business cycle is
going and where it has been.
Three Types o" Indicators
(eading Indicators
+where the cycle is going,
-oincident Indicators
+where the cycle is now,
(agging Indicators
+where the cycle has been,
(eading Indicators
•
*e". Economic acti)ity that happens prior
to +be"ore, a change in the economic
cycle.
•
These are predictors o" where the
economy is going ne't: E'pansion or
contraction.
(eading Economic Indicators
Indicator
•
)erage weekly
initial claims "or
unemployment
•
.tock &rices
Significance
•
/e"lect layo""s and
new hires +more
unemployment,
contraction. (ess
unemployment,
e'pansion,
•
/e"lect In)estor
attitudes +rise
0e'pansion, "all0
contraction,
(eading Economic Indicators
+cont.,
Indicator
•
Interest /ates
•
Inde' o" consumer
con"idence +a sur)ey
o" how people "eel
about the economy,
Significance
•
/ates are lowered i"
a recession is
coming, raised i"
e'pansion.
•
/e"lects changes in
consumer attitudes
about the "uture.
-oincident Indicators
•
*e". In"ormation that is used to measure
economic change as it happens.
1. Total industrial production
2. Total industrial sales
3. &ersonal Income
4. 5umber o" employees on industrial
payroll
(agging Indicators
•
*e". Economic acti)ity that change a"ter
the business cycle e'pands or contracts.
1. Interest rates banks charge on loans
2. mount o" money owed
6nemployment
(ast 6nit: 178, not institutionali9ed,
temporarily laid o"", and looking "or work.
•
6nemployment /ate: de". the percentage
o" the labor "orce unemployed and acti)ely
looking "or work.
+remember, we don:t count people not
looking "or work, ;hidden unemployment<,
Types o" 6nemployment
•
#rictional 6nemployment
•
-yclical 6nemployment
•
.easonal 6nemployment
•
.tructural 6nemployment
#rictional 6nemployment
•
*e". &eople who are between =obs or =ust
entering the work"orce
>
E'. ?igh .chool@-ollege graduates, people
changing careers, etc.
•
This is a normal kind o" unemployment.
-yclical 6nemployment
•
*e". 6nemployment caused by changes in
the business cycle during a contraction
phase. $usinesses lay o"" workers and the
unemployment rate increases. These
workers will "ind work when the business
cycle mo)es to an e'pansion phase. This
is a normal "orm o" unemployment.
.easonal 6nemployment
•
*e". 6nemployment caused by natural
changes in weather@season.
>
E'. #arming, construction, *arien (ake
workers, snow plowers, landscapers.
•
%hen the season changes, they will get
their =obs back. nother normal "orm o"
unemployment.
.tructural 6nemployment
•
*e". -hanges in the economy that makes
certain workers obsolete. Their skills are no
longer needed.
>
E'. $usiness owners mo)e the "actory to
another country +outsourcing,, robots replace
assembly line workers.
•
This is a bad "orm o" unemployment.
These workers ha)e a di""icult time "inding
new =obs because their skills are not
needed. 5eed to be reAtrained "or the new
=ob market
In"lation
•
*e". general rise in prices due to a
decrease in the )alue o" money.
>
E'. B years ago, a can o" soda "rom a
machine cost C.DB. Today it is C1.EE or more.
•
In"lation is natural and e)en necessary.
$ut when in"lation increases too Fuickly, it
has dangerous e""ects on the economy.
+i.e. people cannot a""ord to purchase
needs and wants,
-auses o" In"lation
•
*emandA&ull In"lation:
>
%hen the demand "or products e'ceeds the
supply, prices rise. Too many dollars, too "ew
goods. This is a natural result o" e'pansion o"
the $usiness -ycle.
•
-ostA&ush In"lation:
>
%hen scarcity causes the cost o" production
to increase, prices rise. E'. Gas prices
increase the cost o" "uel "or airplanes, so
ticket prices increase
E""ects o" In"lation
1. &rice o" goods rise +e'. -an o" soda,
2. Honey buys less
3. .tandard o" li)ing declines +e'. Hore and
more households ha)e two people
working to make ends meet,
4. &eople who sa)e money are hurt +i"
in"lation is higher than in)estment
returns, losing money!,
E""ects o" In"lation cont.
•
In"lation hits people with "i'ed incomes
+people with a set monthly income that will
not increase, the hardest.
>
E'. /etirees and disabled people. Their social
security checks, pensions, or in)estments are
limited and do not increase e)en when prices
increase.
doc_303365544.ppt
Okay, I should pay attention to the
business cycle, but how do I know
which direction it is going in?
Economics Joke:
•
There are only two economists in the
world know where the economy is going.
nd they disagree!
I" you were an economist, this would be
hilarious! #or the rest o" us, not so "unny.
$ut, it tells us one thing: economics is
unpredictable. %e can only guess at what is
happening.
Economic Indicators
•
&redicting the business cycle is tricky.
O"ten the economy does not do what
economists e'pect. (ooking at lots o"
indicators gi)e them a "eel "or what is
going on and an idea o" how to prepare "or
the "uture.
•
*e". Trends in the economy which tell
economists where the business cycle is
going and where it has been.
Three Types o" Indicators
(eading Indicators
+where the cycle is going,
-oincident Indicators
+where the cycle is now,
(agging Indicators
+where the cycle has been,
(eading Indicators
•
*e". Economic acti)ity that happens prior
to +be"ore, a change in the economic
cycle.
•
These are predictors o" where the
economy is going ne't: E'pansion or
contraction.
(eading Economic Indicators
Indicator
•
)erage weekly
initial claims "or
unemployment
•
.tock &rices
Significance
•
/e"lect layo""s and
new hires +more
unemployment,
contraction. (ess
unemployment,
e'pansion,
•
/e"lect In)estor
attitudes +rise
0e'pansion, "all0
contraction,
(eading Economic Indicators
+cont.,
Indicator
•
Interest /ates
•
Inde' o" consumer
con"idence +a sur)ey
o" how people "eel
about the economy,
Significance
•
/ates are lowered i"
a recession is
coming, raised i"
e'pansion.
•
/e"lects changes in
consumer attitudes
about the "uture.
-oincident Indicators
•
*e". In"ormation that is used to measure
economic change as it happens.
1. Total industrial production
2. Total industrial sales
3. &ersonal Income
4. 5umber o" employees on industrial
payroll
(agging Indicators
•
*e". Economic acti)ity that change a"ter
the business cycle e'pands or contracts.
1. Interest rates banks charge on loans
2. mount o" money owed
6nemployment
(ast 6nit: 178, not institutionali9ed,
temporarily laid o"", and looking "or work.
•
6nemployment /ate: de". the percentage
o" the labor "orce unemployed and acti)ely
looking "or work.
+remember, we don:t count people not
looking "or work, ;hidden unemployment<,
Types o" 6nemployment
•
#rictional 6nemployment
•
-yclical 6nemployment
•
.easonal 6nemployment
•
.tructural 6nemployment
#rictional 6nemployment
•
*e". &eople who are between =obs or =ust
entering the work"orce
>
E'. ?igh .chool@-ollege graduates, people
changing careers, etc.
•
This is a normal kind o" unemployment.
-yclical 6nemployment
•
*e". 6nemployment caused by changes in
the business cycle during a contraction
phase. $usinesses lay o"" workers and the
unemployment rate increases. These
workers will "ind work when the business
cycle mo)es to an e'pansion phase. This
is a normal "orm o" unemployment.
.easonal 6nemployment
•
*e". 6nemployment caused by natural
changes in weather@season.
>
E'. #arming, construction, *arien (ake
workers, snow plowers, landscapers.
•
%hen the season changes, they will get
their =obs back. nother normal "orm o"
unemployment.
.tructural 6nemployment
•
*e". -hanges in the economy that makes
certain workers obsolete. Their skills are no
longer needed.
>
E'. $usiness owners mo)e the "actory to
another country +outsourcing,, robots replace
assembly line workers.
•
This is a bad "orm o" unemployment.
These workers ha)e a di""icult time "inding
new =obs because their skills are not
needed. 5eed to be reAtrained "or the new
=ob market
In"lation
•
*e". general rise in prices due to a
decrease in the )alue o" money.
>
E'. B years ago, a can o" soda "rom a
machine cost C.DB. Today it is C1.EE or more.
•
In"lation is natural and e)en necessary.
$ut when in"lation increases too Fuickly, it
has dangerous e""ects on the economy.
+i.e. people cannot a""ord to purchase
needs and wants,
-auses o" In"lation
•
*emandA&ull In"lation:
>
%hen the demand "or products e'ceeds the
supply, prices rise. Too many dollars, too "ew
goods. This is a natural result o" e'pansion o"
the $usiness -ycle.
•
-ostA&ush In"lation:
>
%hen scarcity causes the cost o" production
to increase, prices rise. E'. Gas prices
increase the cost o" "uel "or airplanes, so
ticket prices increase
E""ects o" In"lation
1. &rice o" goods rise +e'. -an o" soda,
2. Honey buys less
3. .tandard o" li)ing declines +e'. Hore and
more households ha)e two people
working to make ends meet,
4. &eople who sa)e money are hurt +i"
in"lation is higher than in)estment
returns, losing money!,
E""ects o" In"lation cont.
•
In"lation hits people with "i'ed incomes
+people with a set monthly income that will
not increase, the hardest.
>
E'. /etirees and disabled people. Their social
security checks, pensions, or in)estments are
limited and do not increase e)en when prices
increase.
doc_303365544.ppt