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It is almost impossible and to be frank it is a rather fruitless exercise to try to to predict the exact timing of when the next economic cycle will come to an end and a new one will begin to unfold. However, there are a number of economic indicators and measure that can give us a rough idea of the current state of the economy and its place in the overall business cycle.
Over the years I have compiled a number of those those indicators which are rather useful as well as reliable
SAHM rule - Simply put take the current value of the 3-month average of the unemployment rate and subtract the lowest value from the last twelve months of 3-month averages. If the difference is 0.5 points or more we are in a recession.
Nicely defined HERE
Inverted yield curve - It is generally regarded that if you want to allocate your capital to long term investments (30-year treasury bill for example) you should require higher rate of return due to the uncertainty of the future as well as the effects of inflation. Sometimes, however, investors are more uncertain about what is going to happen with the economy in the near future which drives the short-term(1-year or 2-year) bond returns higher than the long-term(10-year or 30-year) bond yield. This is when the yield curve inverts and historically once this happens recession is expected to engulf the economy within the next few months. Currently as of 17th August 2024 it has been 20 months since it inverted.
Freight trend in US - "JB Hunt" stock price and reports - Freight plays a big role in the economy and it can play a in important role in predicting the direction of the economy is heading. As demand for goods slows down the need for freight services weakens in turn leads to contraction of the economy.
Described HERE
Full-time to part-time new jobs ratio - As demand for goods and services goes down, employers will start letting go their full-time workers or possibly reduce their working hours. It is useful to monitor for a crossover between the increase in part-time and the decrease in full-time which might signal a turning point in the economy.
Presented HERE
ISM Manufacturing Index - The ISM manufacturing index or purchasing managers' index is considered a key indicator of the state of the U.S. economy. It indicates the level of demand for products by measuring the amount of ordering activity at the nation's factories.. The Manufacturing Index report outlines index movement for manufacturing, new orders, production, employment, inventory, prices, and backlogs.
Can be found HERE
Year-Over-Year Weekly National Bankruptcy Filings - It goes without saying that an increase in the number of bankruptcy filings tells us the economy is doing well or there is a core issue with they way banks are lending money.
Can be viewed HERE
Delinquency rate on credit cards and auto loans - Those two statistics are tells us the overall financial state of the US population. More people unable to pay their credit cards and cover their car payments is clearly shows massive dents in everyones financial health and consequently the economy's.
Percentage of Loans Transitioning Into 30+ / 90+ days Delinquency - These tells us the amount of people who have not covered their credit card and loan balances before they get written off by the lenders which will severely affect the borrower's credit score.
Charge-off Rate on Credit Card Loans - This one tells us how well the banks are doing in terms of recouping their money from people who have borrowed on their credit cards. If banks cannot get their money back they need to write it off which is the equivalent of burning bank notes.
Updated quarterly HERE
Personal Savings Rate - Higher rate generally means people are scared with their confidence in the security of their job and ultimately the economy diminished. Lower savings rate means people are in good spending mood, feel secure and happy about their financial situation, have no doubts they will survive if they lost their job or do not foresee the economy taking a turn for the worse.
Updated quarterly HERE
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