Leading Indicators - PPI (PPIACO) vs. Unemployment (UNRATE)

2022年12月29日

I wanted to highlight how the peak (downward move) in the Producer Price Index (PPIACO) typically corresponds with the trough (upward move) in the Unemployment Rate (UNRATE) (inverse correlation), as a period of Recession takes hold on the economy, & the financial markets.

I also wanted to compare the above correlation with cycle tops in WTI Crude Oil (WTISPLC), & also with respect to the OECD Leading Indicators (USALOLITONOSTSAM) — as this helps to pinpoint some of the historic baseline(s) for predicting the peak &/or trough in the business vs. market (financial) cycles.

Here is the key for the attached chart(s):

Top Chart

• Black Line (Unemployment Rate - UNRATE): *Black Vertical Dotted Line* = Recession Timing Trough
  
• Blue Line (Producer Price Index - PPIACO): *Blue Vertical Dotted Line* = Recession Timing Peak
  
• Orange Line (WTI Spot Crude - WTISPLC): *Orange Vertical Dotted Line* = Recession Timing Peak
  
• Red Shaded Areas (Recession): Indicator via chrism665

Bottom Chart

• OECD Leading Indicators (USALOLITONOSTSAM): *Black Dashed Line* = Pre-Recession Indicator Peak
  
• Green Horizontal Dotted Line = Expansion Baseline (100)
  
• Orange Horizontal Dotted Line = Current Reading (98.62)
  
• Red Horizontal Dotted Line = Danger Zone (<97)
  
• Red Shaded Areas (Recession): Indicator via chrism665

Looking at the larger picture of both charts, you can see that typically in previous periods of Recession you would see this flow of the signals (first to peak/trough, last to peak/trough):

• Peak - OECD Leading Indicators (USALOLITONOSTSAM)
  
• Trough - Unemployment Rate (UNRATE)
  
• *Peak - Producer Price Index (PPIACO)*
  
• *Peak - WTI Spot Crude (WTISPLC)*
  

*Note* - As you can see PPIACO & WTISPLC are very closely correlated as demand peaks out, you then see a shift downward in WTISPLC as this is a signal of the topping of economic growth.

Now let's dive close-up into each time period of recession, as we can see some linkages/similarities in the 1991, 2001, & 2009 recessions vs. the what is (likely) a 23' recession, depending how the economic, markets, & financial data plays out this upcoming year — potentially into 24'.

1991 Recession Timeline

• Peak - OECD Leading Indicators (USALOLITONOSTSAM): July 1987
  
• Trough - Unemployment Rate (UNRATE): Mar. 1989
  
• Peak - Producer Price Index (PPIACO): Oct. 1990
  
• Peak - WTI Spot Crude (WTISPLC): Nov. 1990
  

2001 Recession Timeline

• Peak - OECD Leading Indicators (USALOLITONOSTSAM): Jan. 2000
  
• Trough - Unemployment Rate (UNRATE): Apr. 2000
  
• Peak - WTI Spot Crude (WTISPLC): Nov. 2000
  
• Peak - Producer Price Index (PPIACO): Jan. 2001
  

2009 Recession Timeline

• Trough - Unemployment Rate (UNRATE): May 2007
  
• Peak - OECD Leading Indicators (USALOLITONOSTSAM): June 2007
  
• Peak - WTI Spot Crude (WTISPLC): June 2008
  
• Peak - Producer Price Index (PPIACO): July 2008
  

2023(24) Recession Estimated?

• Peak - OECD Leading Indicators (USALOLITONOSTSAM): May 2021
  
• Peak - Producer Price Index (PPIACO): June 2022
  
• Peak - WTI Spot Crude (WTISPLC): June 2022
  
• Trough - Unemployment Rate (UNRATE): Sept. 2022
  

What do you think about this macro analysis? Have we potentially been in a recession in 22' — or are we moving closer to higher unemployment (UNRATE) in 23' as the macro/market conditions worsen, & the Federal Reserve's tighter monetary conditions (liquidity & credit) take their toll on the economy? Let me know what you think in the comments below! 👇🏼

2023年1月3日

注释

If you'd like a copy of this template, you can copy here: 📊

tradingview.com/chart/ZGz5xPow/