Employment tends to
A) lead the cycle.
B) be coincident with the cycle.
C) lag the cycle.
D) sometimes lead, sometimes lag the cycle.

Question

Quizplus · Accepted Answer

Employment tends to lag the cycle because it takes time to hire and fire employees based on changes in economic conditions. When the economy is expanding, businesses may be hesitant to immediately hire new employees until they are certain that the growth is sustainable. Similarly, during a recession, businesses may be slow to lay off workers until they are sure that the downturn is long-lasting. This lag in employment changes relative to the overall economic cycle makes it a lagging indicator.

Employment Tends to