It's fascinating how many correlations there exist in the economic world. Today I found this one: Capacity Utilization Vs. Unemployment are inversely correlated. And the best part is: the capacity utilization rate is a leading indicator for unemployment, meaning the trend in the capacity utilization rate can predict the trend in the unemployment rate.
For the U.S. the chart looks like this:
For the country I live in, Belgium, the correlation works too (one chart goes up, other chart goes down):
For Canada it works too:
It even works for the Euro Area:
And Japan:
Do you know what this means? If we just look at the capacity utilization (which is a leading indicator), we can predict the unemployment rate. And if we can predict the unemployment rate, we can predict the retail sales, GDP growth, current account deficit/surplus, currency ratio, etc... I could never believe capacity utilization rate could be so important and significant.
Cherish this correlation!
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