FACTBOX: Economic data to watch to gauge recession risks

WASHINGTON (Reuters) - U.S. job growth is weakening, manufacturing activity is slowing and businesses and consumers have tightened up on spending as the economy teeters on the edge of recession.

During the third quarter the economy expanded at a 4.9 percent annual rate, according to the Commerce Department's gross domestic product report, which measures total output of goods and services within U.S. borders. But the outlook for the final three months of 2007 and most of 2008 are not expected to be as bright.

A recession is commonly defined as two consecutive quarters of back-to-back negative readings on GDP. The Commerce Department's initial take on the fourth quarter, which many are now forecasting to show a contraction, will be available at the end of this month.

Below are some key economic reports, many of which are used to compile the GDP data, that economists are watching to gauge if the economy is slipping into recession.

- LABOR DEPARTMENT'S EMPLOYMENT SITUATION REPORT

In December, the economy added just 18,000 jobs, bringing the employment rate up 0.3 percentage point to 5.0 percent, the highest in two years.

Employment is a lagging indicator and the last key piece toward mapping out a recession. Economists generally view this report as recessionary when the unemployment rate rises by 0.5 percent or more from the low point of a business cycle or by 0.3 percent on a three-month rolling basis.

Firms will cut back on hours and hold off on business investments before cutting their workforce, particularly in such a tight labor market, but prospects of an economic downturn will indeed drive businesses to stop hiring and even consider trimming their workforce.

- CONFERENCE BOARD'S INDEX OF LEADING ECONOMIC INDICATORS

The New York-based conference board last reported that this index fell by twice what was expected in November after dropping in October, pointing to a slowing economy ahead. The index is compiled from several leading indicators such as initial jobless claims, consumer goods orders, capital goods orders, building permits, stock prices and Treasury yield curves.

A pattern of weak readings from this index is customarily seen as recessionary.

- COMMERCE DEPARTMENT'S BUSINESS AND WHOLESALE INVENTORIES

REPORTS

The Commerce Department releases two separate reports on inventories - from businesses and from wholesalers. These reports are a good gauge of expected demand. Businesses will build their inventories if they expect increased demand.

The most recent data, available at present through November, is showing that businesses did not build inventories and economists say this will be a drag on GDP.

Expectations are that the inventory correction will no doubt spill over into the first part of this year. The stock to sales ratio of inventories, which measures the number of months it would take to deplete stocks at the current sales rates, has been at record low levels.