Unemployment Changes as Recession Indicators

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.

Keywords: unemployment; recession; labor market; recession indicators;

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Bibliographic Information

Provider: Federal Reserve Bank of Richmond

Part of Series: Richmond Fed Economic Brief

Publication Date: 2023-04

Volume: 23

Issue: 13