EC 304
Assignment #1
The popular definition of an economic recession is two consecutive quarters during which real GDP declines. The "official" dating of recessions, however, relies on a more sophisticated analysis of many different indicators of economic activity, looking at monthly data as well as quarterly data. This "official" dating of business cycles is done by a committee of the National Bureau of Economic Research (NBER). Because the committee meets only when the likelihood of a turning point is pretty high, the actual decision of whether a recession has begun or ended often comes 6-12 months after the turning point. Here is a link to the NBER site that gives details about how the committee determines the dating of recessions: http://www.nber.org/cycles/recessions.html.
For this assignment, you are asked to judge whether the recession, which began in March 2001 for the U.S. economy, has ended. You may present your findings in probabilistic terms, for example, that some indicators suggest economic recovery while others may not. In the end, you may also want to make a call as to whether or not a recovery started to take hold only to be cut short by a double-dip recession. You may also want to look back at the last two recessions to see how the timing of various indicators evolved as the recessions began and ended. Here is a link to the NBER site that gives dating of business cycles back to the 1850s: http://www.nber.org/cycles.html
In your analysis, you should assess five key economic indicators. Quarterly real GDP, monthly real personal income, monthly payroll employment, monthly industrial production, and monthly real retail and food services sales. The best place to find this data is at the web site of the Federal Reserve Bank of St. Louis (FRED): http://www.stls.frb.org/fred/index.html, or, alternatively, at the government agencies that produce the numbers. Here is a listing with links to the agencies' sites for each of these data series:
Bureau of Economic Analysis (GDP, Income)
Bureau of Labor Statistics (Employment)
Federal Reserve Board (Industrial Production)
Census Bureau (Retail Sales)
Also, the Bank One Capital Markets economics data site has a good summary of the latest data releases:
http://www.bocm.com/bocmrs/Research_Fixed/usdata/index.html.
In general, you will want to use the seasonally adjusted data if a choice is offered between seasonally adjusted and not seasonally adjusted. Be sure to assess all of the data released the past two weeks, especially the latest employment numbers for August (due out on Friday, September 6).
Keep your analysis concise (2 pages of text, maximum). Feel free to use a charts to illustrate your points.
You will also want to consult assessments by journalists and analysts available in news reports (Wall Street Journal or New York Times). In addition, the JP Morgan Weekly reports that are posted on my site may be helpful.
Please turn in this assignment in class next Tuesday, September 10. You are encouraged to help each other in locating data and discussing your thoughts, but you must write up your own analysis separately.