What It Is:
A lagging indicator is a financial gauge that becomes measurable only after an economic shift has taken place.
How It Works/Example:
There are certain economic indicators that rely on changes in productivity or economic growth. For this reason, lagging indicators do not lend themselves to forecasting. Examples of lagging indicators include company earnings and levels of unemployment.
Why It Matters:
Analysts and economic policymakers measure lagging indicators to confirm or refute previous analyses and the effectiveness of policy directives.