What typically happens to nonfarm payrolls

What typically happens to nonfarm payrolls, the PMI indicator, and housing starts at the onset of a recession in the United States?

Nonfarm payrolls go DOWN, the PMP indicator goes DOWN, the housing starts goes DOWN

Nonfarm payrolls go DOWN, the PMI indicator goes UP, ?the housing, starts goes UP

Nonfarm payrolls go UP, ?the PMI indicator goes DOWN, the housing starts goes DoWN

The Correct Answer and Explanation is :

At the onset of a recession in the United States, the following economic indicators typically exhibit the following trends:

• Nonfarm Payrolls: These generally decline as businesses reduce hiring or lay off employees in response to decreased demand and economic uncertainty. For instance, during the Great Recession, nonfarm payrolls fell by 8.6 million (6.2%) from early 2008 to February 2010. citeturn0search15
• Purchasing Managers’ Index (PMI): The PMI often decreases, reflecting a contraction in manufacturing and services sectors. A PMI below 50 indicates economic contraction. For example, in August 2024, the U.S. manufacturing PMI was 47.2, signaling a contraction. citeturn0news12
• Housing Starts: These typically decline as higher unemployment and economic uncertainty reduce consumer confidence and demand for new homes. During the Great Recession, housing starts fell significantly due to the housing market crisis. citeturn0search15

Therefore, the correct answer is:

Nonfarm payrolls go DOWN, the PMI indicator goes DOWN, the housing starts go DOWN

This pattern reflects the interconnectedness of these indicators during economic downturns. As businesses face reduced demand, they cut back on hiring, leading to higher unemployment and a decline in nonfarm payrolls. The PMI falls as manufacturing and services sectors contract, and housing starts decrease due to reduced consumer confidence and spending.

Understanding these trends is crucial for policymakers and economists to implement effective measures to mitigate the impacts of a recession.

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