OECD CLI Hours Component

OECD Leading Indicator Hours Component

The OECD Leading Indicator Hours Component (OECD CLI Hours Component) is one of the constituent elements of the composite indicator that shows future economic activity in OECD member countries. This indicator is designed to predict the direction of near-term economic growth by tracking changes in actual working hours of workers. Specifically, it indexes the movement of average working hours in manufacturing and various industries, aiming to identify business cycle turning points in advance.

This indicator is important because working hours sensitively reflect supply and demand trends in the economy. When companies anticipate increased production, they first respond by extending working hours for existing workers. Conversely, when demand reduction is expected, companies reduce working hours. In other words, changes in working hours serve as an extremely sensitive economic signal that precedes employment adjustments such as hiring and layoffs, which have high lagging characteristics. For policymakers and investors, it becomes a valuable source of information for inferring business trends months ahead.

As a general trend, when working hours are in an expanding phase, the likelihood of economic expansion is high, while in a contracting phase, economic recession may be approaching. Particularly since labor market structures differ between emerging and developed countries, indexing across the OECD makes country comparisons easier. Key points to note include seasonally adjusted rates of change, simultaneity with other leading indicators, and differences in working hours trends by industry. Regular monitoring contributes to improving judgment of business cycle phases and accuracy of economic outlooks.