Question

List the recession indicators that the Federal Reserve should monitor before deploying monetary policies in response to the next crisis.

Answer 1

Recession indicators include

• Unemployment
• Stock prices
• Market volatility or yield curve.
• Housing prices

While a rise in unemployment is not a major indicator it can suggests that there can be some disturbances in the market and if it continues to grow, it can indicator an approaching recession. If stock market becomes too sensitive due to performance of some sectors and there is a sudden increase in market activity, policymakers can be alerted for a boom to occur and then a resultant burst. Yield curve is also helpful in measuring future market trends. Housing prices in recent years have become a major indicator with 2006-07 housing market bubble was held responsible for the Great Recession.