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When it comes to financial markets and the economy, there is no shortage of news and information… so much so, that it can be overwhelming to sort through all the noise to focus on what really matters. I’ve started sharing a weekly Monday Market Update on Instagram, but many of you have asked about what else you should be watching. This is the first post in a multi-part series of the 10 major economic indicators worthy of your attention.


The Major Economic Indicators You Should Care About

There are literally 1,000s of economic indicators tracked by economists, financial analysts and economic experts. I’ve tried to narrow it down to a handful that are

  • Most informative
  • Impact families most directly
  • Are publicly accessible – without paying for data feeds

I am breaking these 10 major economic indicators into three separate posts: 4 leading indicators, 4 lagging indicators and two others that signal the general welfare of our country. A leading indicator is a data point that is predictive in nature. It will show signs of weakness before the broader economy. A lagging economic indicator often doesn’t weaken until the economy has slowed.

Why You Should Care

By understanding these different major economic indicators, you will better understand economic cycles, where we are in the cycle, and be better able to make both short-term and long-term financial decisions for your family. Since 1945, the US has experienced 11 economic recessions (generally defined as at least 2 consecutive quarters of declining GDP). On average, recessions have lasted 11 months, and GDP has taken nearly 5 years (58.4 months) to recover to previous levels.

Where to Find the Data

As I talk about each of the major economic indicators below, I will provide sources and wherever possible, link to the source data. The St. Louis Federal Reserve makes many economic data series available online, and Koyfin is another free financial database platform I recommend for ease of use.

4 Major Leading Economic Indicators

A leading indicator is predictive. It is often a measure of real-time (or close to it) expectations of where the economy is headed. While many economic indicators take months or quarters to be accurately reported, these are reported instantly, or even monthly, but with greater accuracy. Think of them as the economic canaries in the coal mine.

The Stock Market

Y’all saw this one coming, right? It’s the first major economic indicator we talk about in every Monday Market Update. The stock market is the real-time reflection of investor expectations. And generally speaking, as a group, investors are pretty smart. They are processing all the publicly available information out there – both about the general economy and specific companies and pricing it into stocks.

The bear market, or a decline in the market of greater than 10%, typically occurs months before a recession is officially declared, and the stock market also begins to recover before the recession is over.

Retail Sales

The U.S. Census Bureau reports an advance estimate of monthly retail and food service sales on about a 2 week lag. So retail sales for December, get reported in mid-January.

Retail sales is a more data-driven proxy for consumer confidence, or not only how they are feeling about the economy, but how they are actually behaving with their money. Consumer spending makes up approximately 70% of GDP, so it’s also a good indicator of overall economic activity. When times are good, we are out spending money. When things feel more uncertain, we start to pare back – and this is the first place it usually shows up.

Retails sales growth slows substantially before starting to decline in the months leading up to a recession. It is also a recovery in retail sales that often pulls us out of a recession.

New Housing Starts

The U.S. Census Bureau and U.S. Department of Housing and Urban Development jointly track housing stats at various stages: from permitting to new starts, under construction to completion.

New construction data is extremely seasonal (so data is reported on a seasonally adjusted basis), but also extremely volatile. And you’ll see new housing starts drop precipitously before a recession, and begin to recover before the recession is over.

Housing prices, as measured by the Case-Schiller Index (the grey line in the chart above) also start to fall before a recession – but do so more slowly.

The Inverted Yield Curve

Historically, interest rates have been considered a lagging indicator – as the Fed adjusts its target overnight lending rate in response to what it was seeing in the economy. However, that’s only one end of the yield curve. The market controls the rest of it. And historically, when the yield curve inverts for an entire quarter, a recession follows within the next 12-24 months. That sounds pretty predictive to me!

In a normal environment, longer-term interest rates are higher than short-term rates as there is more risk with more time. You can see examples of a “normal” yield curve in 2003 and 2013 below. However, when investors are more concerned about the economy, they often shift funds from the riskier stock market into safer bonds. This “flight to safety” raises bond prices, while pushing yields lower.

This has the effect of pushing down the interest rates on longer-term maturities before the Fed lowers its target rate causing the yield curve to flatten and even invert, with long-term interest rates faller lower than short-term interest rates. In the summer of 2019, we saw the yield curve invert again. The Fed took steps to lower rates in the second half of 2019 in response, but the curve remains relatively flat.


Understanding these major economic indicators will help you be a more informed investor and make overall better financial decisions for your family and family finances. If these leading economic indicators aren’t painting a clear picture, check out these major lagging indicators to confirm where we currently are in the economic cycle. For more insights on investing, check out these posts!

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About Meghan

Meghan spent nearly a decade as a Financial Analyst, before spending the last 7+ as a SAHM to three little ones. She shares simple money tips for moms to help your family reach your financial goals by building a financial plan you can LIVE with! You can learn more about her background in finance, catch her daily on Instagram and Facebook, and her weekly live discussions in her community for Family Finance Moms.

1 Comment

  1. What is a Lagging Economic Indicator? on February 19, 2020 at 12:55 pm

    […] talk in the last year of will there or won’t there be a recession, last week I covered the 4 leading major economic indicators to watch that help predict a recession before it comes. And as I anticipated, lots of you wanted to […]

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