Microeconomics

The purpose of this paper is due for you the opportunity to examine two macroeconomic statistics in detail and relate their behavior and relationship to overall aggregate economic activity over the last 40 years. You should choose two economic indicators from the list at the NBER website located at: http://www.nber.org/releases/.

While you may choose any statistic you like, I would recommend that you focus on indicators that are of interest to your firm or industry (food/farming industry), or that you select two indicators from the following list:
1.Industrial Production/Durable Goods Production
2.Index of Leading Indicators
3.Purchasing Managers’ Index (Now called “ISM Index”)
4.ISM Services Index
5.Labor Productivity
6.Capacity Utilization
7.Building Permits/Housing Starts
8.Existing Home Sales
9.Monthly Change in Manufacturing and Trade Inventories
10.Durable Goods Orders
11.Non-farm Payroll
12.Unemployment rate
13.Jobless Claims
14.Help Wanted
15.Retail Sales
16.Consumer Expectations (“Michigan survey” or “Michigan report”)
17.Consumer Confidence (Conference Board)
18.CPI
19.Fed funds rate (http://www.federalreserve.gov/fomc.)
20.Trade Balance
21.GDP (and revisions)

All of these indicators can be classified into three broad categories: output, unemployment, and inflation. You MUST choose indicators in TWO of these broad areas. That is, you CANNOT examine both the unemployment rate and nonfarm payroll data, since both of these series are related to unemployment. You would have to choose a second indicator in either the inflation category (e.g. CPI), or one that deals with output (e.g. GDP).

Released data (and a schedule of forthcoming releases) can be found at: http://biz.yahoo.com/c/e.html. No, you cannot choose the S&P500, Dow Jones Industrial Average, NASDAQ, nor any other financial index for this paper.

How to write this paper:
1) Choose two indicators, from two of the above categories, that you wish to examine in further detail.
2) Obtain data on these indicators from January, 1979 to the most current release. Historical data for most of the NBER statistics can be found at the St. Louis Federal Reserve Bank’s “Fred 2” webpage that is located at: http://research.stlouisfed.org/fred2/. If you have difficulty locating data, please let me know and I will try to help you out.
3) Obtain data the NBER business cycle dates (i.e. the starting and ending dates of recessions) since 1979. The business cycle dates are located here: http://www.nber.org/cycles.html.
4) Briefly define and describe the indicators you are examining. Indicate what, exactly, the indicators are attempting to measure. Also indicate the reporting frequency (i.e. monthly, quarterly, or annual), the reporting lag (i.e. is the statistic released on the third Friday following the end of the month, or is released on the first Friday following the end of the month), and if the definition of the statistic has changed over time. If they have, indicate how the change in what the effect has been on the statistic.
5) Describe the behavior of your two statistics through time. Specifically examine how the current value of each of your statistics relates to historical values (i.e. the average, high, and low values since 1979.)4 Also, using the NBER business cycle data from 3, above, describe how your statistic behaves during the recessions that have occurred since 1979. Graph your two data series using Excel.
6) Discuss any common themes that are evident in your statistics throughout time. For example, do your statistics peak during, prior to, or after the (start or end of a) recession. Has their behavior changed through time?
7) I would anticipate it will take you approximately 5-6 pages (1” margins, 10-12 point font, not including graphs, tables, charts, etc.) to adequately address these topics.

You should provide enough historical context in your paper to determine if the current release indicates good, bad, or neutral economic news. Please put all tables, charts, and so forth at the end of your paper.