Table 5 Lifecycle of the Expansion
Description: • Table 5 plots the unemployment rate against average weekly hours in manufacturing on a quarterly basis since the first quarter of 2020. • There are four phases: • In the initial phase of an expansion, unemployment is stable and remains high while there is a sharp rise in hours per week. • In the second phase, the unemployment rate falls while hours per week tend to be relatively stable. • In the third phase, the unemployment rate is stable and hours per week decline. • A contraction occurs when unemployment rises and hours per week falls. Analysis: • Falling average weekly hours can be a leading indicator of an impending recession as employers will often decrease hours worked before laying off workers (the third phase, in other words). • Our plotting of the business cycle using the unemployment rate and average weekly hours recently has shown a relatively modest rise in the unemployment rate since Q1 2023 with average weekly hours declining before increasing in Q1 2024. • Declines in average weekly hours combined with initial increases in unemployment rate, absent positive shocks to the economy, often have been leading indicators of a recession. While average weekly hours fell over 2023, they did rise in Q1 2024, meaning any prediction of an upcoming recession may be premature.
Central Wisconsin Report - Spring 2024
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