United States: Tracking Early Signals of Post-COVID Crisis Rebound

(April 7, 2020)  In early 2020 economists and statisticians faced a similar problem as 90 years ago in the very beginning of the Great Depression. After the economy collapsed in the fourth quarter of 1929 the US government needed to find a way to measure the magnitude of the recession. Fast forward to the late 1930s and the first official US national accounts were born from the efforts of one Simon Kuzents. This was the introduction of the modern concept of ‘gross domestic product’, a central concept of modern economic analysis.

While GDP can confirm the speed and magnitude of changes in economic activity, by virtue of being estimated on a quarterly basis, significant changes in economic activity (upward or downward) typically only appear three to four months post-fact. GDP certainly cannot measure up to a COVID-19 economic experience. 

Even leading indicators—introduced first in 1938 by Wesley C. Mitchell and Arthur F. Burns, founders of business cycle research—with the benefit of monthly and even daily frequencies, as well as positive track records for predicting recessions 3 to 6 months out, are ill equipped for COVID-19.

In this dashboard we compare the ability of "traditional" leading indices and some alternative economic indicators to produce early warning signals of economic downturns.