Leading Indicator of Unemployment Rate – Policy-Relavent and Methodology
Leading indicators technique for tracking or forecasting the direction of changes in economic activities rely on the signals from other variables, whose turning points have historically always preceded the economic cycle’s turning points. Thus, it is based on the signals of variables that have empirically “driven” the economic cycle, such as output, sales, investment, inflation, and money supply. This information enables the government to make and launch policies at the right time. The unemployment rate in Malaysia is usually provided with a two month-lag. By adding labour market factors to the “leading” indicators of economic activity, the approach can be expanded to predict changes in the employment cycle. Hence, research is needed to develop leading indicators for labour market policy monitoring and evaluation.