In short: Leading economic indicators are data series that tend to turn before the wider economy does. Jobless claims, building permits, factory orders, the yield curve and consumer expectations are among the most watched. Each one is noisy on its own, so they are most useful read together, and even then they can give false alarms.
Why “leading” indicators exist
Most economic statistics describe the past. Gross domestic product, the unemployment rate and corporate profits tell you what already happened, often with a delay of weeks or months. Leading indicators try to look ahead. They measure decisions that people and businesses make before activity changes: a factory cutting overtime, a builder applying for a permit, a lender tightening credit.
The best known bundle is the Leading Economic Index (LEI) published by The Conference Board in the United States. It combines ten series into one number. In September 2026 the index stood at 99.6 (with 2016 set at 100), unchanged from August and up 0.6% over the previous six months. The list below covers eight of its ten components, the ones that are easiest to follow and interpret on their own. The other two are separate measures of manufacturers’ new orders.
The eight indicators
1. Initial jobless claims
Each week the US Labor Department reports how many people filed a first claim for unemployment insurance. Companies usually trim hiring and then cut staff before a downturn shows up in the monthly unemployment rate, so a steady rise in claims is one of the earliest signs of a weakening job market. The weekly figure is volatile, which is why analysts watch a four-week average.
2. Building permits
Before a house is built, someone has to apply for a permit. Permits for new private housing units therefore show builders’ plans months before construction spending or home sales change. Housing is sensitive to interest rates, so permits often react early when borrowing costs rise. We look at the wider market in why houses are so expensive.
3. ISM new orders
The Institute for Supply Management surveys purchasing managers about new orders, among other things. A reading above 50 means more companies report rising orders than falling ones. Orders come before production, so this survey tends to move ahead of factory output and employment.
4. The yield spread
This is the gap between the 10-year Treasury yield and the federal funds rate. When short-term rates rise above long-term rates, the curve is said to be inverted, a pattern that has preceded many US recessions. It reflects tight monetary policy today and market expectations of lower rates later. The mechanics are explained in how interest rates work.
5. Consumer expectations
Surveys ask households how they expect business conditions to change. Consumer spending drives most of the US economy, and gloomy expectations can lead to postponed purchases. Sentiment can also swing with headlines, so it is better treated as a mood check than a forecast.
6. Average weekly hours in manufacturing
When demand softens, employers usually cut hours before they cut jobs, because it is cheaper and easier to reverse. A sustained drop in the length of the factory workweek can therefore warn of layoffs to come. This series carries the largest weight in the Conference Board index.
7. Stock prices
The S&P 500 reflects investors’ expectations of future profits, which makes it forward-looking by design. It is also prone to swings that have little to do with the real economy. The old joke that the stock market has predicted nine of the last five recessions captures the problem.
8. Credit conditions
The Conference Board’s Leading Credit Index tracks signals from financial markets and bank lending surveys. When credit becomes harder or more expensive to obtain, businesses invest less and households borrow less, which slows activity with a lag.
At a glance
| Indicator | What it measures | What a warning looks like |
|---|---|---|
| Initial jobless claims | New unemployment filings | A sustained rise in the four-week average |
| Building permits | Planned home construction | Several months of decline |
| ISM new orders | Orders reported by purchasing managers | Readings below 50 |
| Yield spread | 10-year yield minus fed funds rate | Short rates above long rates |
| Consumer expectations | Households’ outlook | A sharp, lasting drop |
| Weekly hours, manufacturing | Length of the factory workweek | Hours cut across industries |
| S&P 500 | Investors’ profit expectations | A deep, prolonged fall |
| Leading Credit Index | Cost and availability of credit | Tightening lending conditions |
The limits of leading indicators
No indicator works alone, and even the combined index can be wrong. The LEI fell for 23 consecutive months to January 2024, and The Conference Board warned of a US recession from mid-2022 until February 2024, when it said the index no longer signaled one. A recession did not arrive in that period. Strong household finances, government spending and a labor market that stayed tight were enough to offset the warning signs.
The lesson is not that the indicators are useless. They describe pressure building in the economy, and pressure does not always break through. They are best used to adjust expectations, not to make large, all-or-nothing bets. For what the end of an expansion usually looks like, see what a recession is, and for the full picture of how these forces interact, start with how the economy works.
Frequently asked questions
What is the difference between leading and lagging indicators?
Leading indicators tend to change before the economy as a whole, while lagging indicators change after it. The unemployment rate is a classic lagging indicator, because companies often delay layoffs until a slowdown is well under way. Coincident indicators, such as industrial production, move roughly at the same time as the economy.
How often is the Leading Economic Index published?
The Conference Board publishes the US index monthly, usually in the second half of the month, covering the previous month. Many of its components are also released separately and more often, such as weekly jobless claims and daily stock prices, so you can follow them between releases.
Can individual investors use these indicators to time the market?
Timing the market on them is risky. The indicators can warn for years before a downturn or warn of one that never comes, and markets often move before the data. They are more useful for judging general risk, such as whether to keep a larger cash buffer, than for deciding when to buy or sell.
Do other countries have leading indicators?
Yes. The Conference Board publishes leading indices for several major economies, and the OECD produces composite leading indicators for its member countries. The components differ by country, because housing, manufacturing and credit play different roles in each economy.
