Economic Recovery

DEFINITION of 'Economic Recovery'

A period of increasing business activity signaling the end of a recession. Much like a recession, an economic recovery is not always easy to recognize until at least several months after it has begun. Economists use a variety of indicators, including GDP, inflation, financial markets and unemployment to analyze the state of the economy and determine whether a recovery is in progress.

BREAKING DOWN 'Economic Recovery'

Some confusion commonly results from the use of both leading and lagging indicators in analyzing whether an economic recovery is in progress. Leading indicators, such as the stock market, often rise ahead of economic recovery. This is because stocks are priced based on future expectations. On the other hand, employment is typically a lagging indicator. Unemployment often remains high even as the economy begins to recover because many employers will not hire additional personnel until they are confident there is a long-term need for new hiring.

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