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Jan 09 2013

Quick Recognition of Shifts in Long-Term Trends

Many explanations have been put forward for the disappointing growth that followed the Global Financial Crisis in a number of countries, including the theory that longer-term economic growth prospects may have fundamentally changed. In cases like this, it is critical to promptly detect if the economy is experiencing a typical cyclical -- and therefore temporary -- event, or whether there is a fundamental trend shift underway. Unfortunately, up to now, a longstanding problem has been that it is only several years after the fact that changes in a secular trend can be clearly seen for what they are.

ECRI has developed a new system to recognize shifts in the longer-term trend of coincident indicators in the U.S. and other major international economies. With this new tool, it becomes feasible to detect shifts in secular trends quicker and more accurately, offering invaluable insights to policymakers and other decision makers.

Applied to the secular trends in sector-specific employment, this methodology helps clarify whether job market challenges today are more secular or cyclical or both.

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