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

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! 👇🏼

Comment:

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

www.tradingview.com/chart/ZGz5xPow/