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Unemployment Changes as Recession Indicators

Author

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  • Andreas Hornstein

Abstract

After the rapid recovery from the COVID-induced 2020 recession, U.S. economic activity has slowed in 2022, but labor markets have remained strong, and the unemployment rate is at historically low levels. This Economic Brief reviews the evidence on changes in unemployment as a coincident indicator for the start of recessions. I find that changes in unemployment are good indicators of recessions, in particular when combined with lagged term spreads, which are good recession predictors at the one-year horizon but not reliable at short horizons.

Suggested Citation

  • Andreas Hornstein, 2023. "Unemployment Changes as Recession Indicators," Richmond Fed Economic Brief, Federal Reserve Bank of Richmond, vol. 23(13), April.
    • Handle: RePEc:fip:fedreb:96030
    as

    Download full text from publisher

    File URL: https://www.richmondfed.org/publications/research/economic_brief/2023/eb_23-13
    File Function: Briefing
    Download Restriction: no
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