Navigate Uncertain Economic Environments with Leading Indicators of Unemployment Risk
If you are a lender, and find yourself in a dilemma about what economic outlook to believe in and plan for, you may want to consider adding some new early indicators of unemployment to your risk management toolkit.
Current macro and credit data are after-the-fact, not granular enough and can only be used for a reactive risk mitigation or growth strategy. Every recession or recovery is different, making it hard to predict which industry or geography will bear the brunt of a downturn and what type of recovery will follow.
The chart below demonstrates how industry specific early layoff indicators developed by the Livesight team can equip lenders with an extra ~2-3 months to prepare and appropriately adjust their credit policies.
Here is how as a risk manager, you could leverage these real time indicators right now:
- Monitor for sudden changes in early indicators of unemployment at granular levels
- Batten down the hatches by preemptively raising criteria for the most volatile segments
- Make sure your portfolio composition by segment doesn't drift too far as borrower demand changes
So, how does this work in practice?
Livesight’s Income Stability Indicators (ISI) API resolves freeform employer name and ZIP code from loan applications to return scores and attributes on future risk related to aggregated employment. These cut across multiple levels: Employer/Business, Geography (MSA or higher), and Industry (NAICS 2, 4, 6). The API is powered by Livesight’s proprietary entity resolver and several third-party and publicly available data sources, including future layoff notifications, online job postings, unemployment claims, employment, hours, wages, housing, and mortgage delinquency rates.
How can we test the data?
There are three ways the data can be tested without providing any Personally Identifiable Information (PII): 1) retroactive data study on historical applications, 2) live testing through Livesight’s API or 3) receive latest data in a batch mode.
