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* LEADING INDICATOR: may signal future changes; LAGGING INDICATOR: may confirm pattern already in progress; COINCIDENT INDICATOR: occurs in real time and clarifies condition of economy.
The terms leading, lagging, and coincident deal with the time horizon and not whether the economy is doing “better or worse” relative to somewhere else. Leading indicators are considered to point toward future events, are upstream in the process, and can give a heads-up for anticipated trends. Lagging indicators are seen as confirming a pattern in progress, and can only be known after the event because they are the outcomes of the leading factors that occur upstream. Coincident indicators occur in real-time and clarify the state of the economy. They tend to move in step with general economic trends and give a snapshot context of what is happening and how markets and economies are responding to the factors that affect their direction.
Where Are We?
Employment: Not much contrast yet compared to 2019; January and February mitigated a lackluster March. January employment was up 1.8% over Jan. 2019, and February was up 1.5% over Feb. 2019, while March was -0.7% compared to Mar. 2019. Depending on data revisions made to March and preliminary April data, there will likely be two consecutive months of deteriorating employment, which would show more obvious contrast compared to 2019.
Unemployment Claims: There were 2,978 claims made in March in the Tallahassee MSA, compared to 307 in February and 406 in January. The March total was about the same as the previous eight months combined—an order of magnitude difference in one month.
State level data from US Bureau of Labor Statistics (BLS) likewise show a major surge in unemployment claims statewide. During the six weeks from mid-March to late April, according to BLS, there were nearly 1.6 million initial claims for unemployment insurance in Florida, about the same as the combined total of the prior 219 weeks (1/2/2016 to 3/7/2020). As of the week ending April 18, 2020, continued claims for unemployment statewide totaled 540,554, the highest weekly amount in BLS data going back to 1987. Continued claims data is not available at the local level.
Tourism: The -14% dip in visitors compared to last year was for Q1 of FY 2020, which was October to December 2019, well before pandemic and quarantine affected local conditions. Visitor totals were only down 7.8% from the prior quarter. Direct expenditures of visitors were down just 6.2% compared to Q1 FY 2019, and only down 1.5% from the prior quarter.
Passengers: Lowest quarter since Q3 2017, but still higher than comparable quarter of Q1 in 2017. A good January and February somewhat offset a lackluster March. January was up 11% compared to Jan. 2019 and February was up 12% compared to Feb. 2019.
We’re seeing deterioration of economic conditions expressed in some of the leading indicators (e.g., Initial Claims for Unemployment), while the negative effects of COVID-19 quarantine have not been occurring long enough yet to adversely affect the lagging indicators (e.g., Office Vacancy Rate).
The relationship between leading and lagging indicators is apparent. Unemployment claims have increased immediately. Employment showed mediocre growth. While the unemployment rate does not show a precipitous rise, it does lag initial claims by almost a month.
If the labor market continues to deteriorate, we are likely to see more leading indicators worsen and as those conditions persist, the lagging indicators will confirm the trend. This could eventually result in higher rates of foreclosure, wage stagnation, increased vacancy rates, and a higher sustained unemployment rate. Taxable Sales data will very likely confirm reduced revenue projections.
We don’t know how much the Tallahassee metro area will mirror the State’s condition of recent months. Past performance tells us the local labor market does not peak as high nor dip as low as the State, and local labor market conditions generally lag the State trend by a month or two.
Expect a downward trend in the local economy in the near future, but it’s too soon to tell how long it will last, or how significant it will be.