NEW YORK (CNN/Money) - Leading, lagging or sagging? That's the big question hanging over the economy in the wake of the June employment report.

A lot of folks on Wall Street were quick to dismiss the big jump in the unemployment rate last month to a nine-year high of 6.4 percent, saying that it's a lagging indicator, that the economy will turn long before the jobless rate does.

That's often true. For example, the 1990-91 recession ended in February of 1991, but the unemployment rate, which had gotten as low as 5.2 percent before the recession started, did not peak until June of 1992 when it got up to 7.8 percent.

One reason the unemployment rate lags coming out of a recession is that companies don't start hiring workers again until they absolutely have to - until they are certain that demand is picking up and they have wrung every last hour of overtime out of their existing employees that they possibly can.

At a time like this, when many companies have invested in lots of new technologies and are highly "productive," some economists say this effect is even more pronounced. Of course, a lot of workers say what makes them more "productive" is simply the fact that they are expected to arrive early, stay late and take home work on the weekend. But that's another story.

Another reason unemployment can keep rising even when the economy has started to recover has to do with human psychology.

If you are unemployed, and so discouraged that you aren't even looking for work, you are NOT counted in the work force so you are not counted as unemployed. That's because of how the government sets the parameters of the labor force: to be part of it, you have to be actively seeking a job.

Here's where psychology comes in. If you get the notion that the economy is picking up and you believe there's now a chance you can find a job, you will get dressed, leave the house, and look for a job. NOW you are part of the labor force again even though you have not yet found a job and NOW you are once again counted as unemployed. This is one more reason why the unemployment rate can remain higher even when things are starting to pick up.

So, given that the unemployment rate is lagging, do we simply cast it aside? Or are there other indicators to watch, maybe even some that tell us what the economy is doing right now and where it might be heading?

Of course there are, and two of them also come right out of the labor market.

For starters, there's the net number of new jobs created each month, known as non-farm payrolls. Payrolls fell 30,000 in June on top of 70,000 in May and they have been falling for five months in a row. (Manufacturing is especially depressing, cutting jobs for 35 months in a row!)

In fact, employment is one of the four "coincident" indicators that are used to date the beginnings and ends of recessions and recoveries. So, this is one more piece of information saying that even if unemployment lags, the signal of weakness it's sending may not be inaccurate because this important coincident index is telling us right now there's still no net new job creation.

As for where we are heading, the weekly new claims for unemployment benefits are one of the ten items in the index of leading indicators along with things like building permits, orders for big-ticket durable goods, and money supply.

And what did they do last week? Jobless claims jumped by 21,000 up to 430,000, and have been above 400,000 (a rough sort of rule-of-thumb level above which the labor market looks yucky) for 20 weeks in a row. So here again, the leading indicator seems to be confirming the message from the unemployment rate: the labor market has not turned yet.

Probably the most bullish thing to be said of leading, lagging and sagging indicators is that the stock market (another one of those 10 leading indicators, by the way) is looking even farther into the future and it sees a tax-cut induced recovery ahead. That's a message the bond market seems to be sending, too, as yields rocket higher.

A note of caution, though, some economists say the stock market's record in predicting the economy isn't much better than Wall Street pundits or financial journalists.  

Kathleen Hays anchors The FlipSide, airing Monday to Friday on CNNfn. As part of CNN's Business News team, she is also a regular contributor to Lou Dobbs Moneyline.