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Macro Journal

A practicing Macroeconomist must absorb a vast amount of complex quantitative information in order to form a simple qualitative assessment of the economy. The "Macro-Journal" is a tool to facilitate this process.

Each week I ask my students three key questions that gauge their assessment of the U.S. economy. The questions are posed as follows: "Given the data and news stories released in the previous week, has your assessment of OVERALL ECONOMIC ACTIVITY improved, deteriorated, or remained the same, as compared to the previous week?" We then replace the phrase OVERALL ECONOMIC ACTIVITY with the LABOR MARKET and PRICE LEVEL. Their assessment is classified into one of three categories: a) Improving, b) Deteriorating, c) Remaining the Same.

The phrasing of the question is very deliberate. First, this is a dynamic measure in that we are seeking the change in activity from week to week. Second, I am interested in the respondents' perception of activity. This is a subtle, but important point. The urge is to locate and align all the data corresponding to week 1 and compare is to all of the data in week 2. However, we don't have a readily available, high frequency measure of economic activity. Rather, we are examining each respondent's perception of activity, and how that perception may change as they are presented with new information. Each week data of different frequencies and vintages are made available (jobless claims for last week, trade deficit for two months ago, etc...) We examine how this new information influences respondents perceptions of activity.

Evaluating economic growth and the labor market is relatively straightforward: An increase in personal consumption expenditures is evidence of increased economic activity, and a rise in jobless claims may suggest a deterioration in the labor market. Evaluating the price environment is more difficult. For simplicity, we maintain the notion that stable price are good for the economy. Therefore, evidence of price stability are treated as an improvement and price instability as deterioration.

The graph in the top panel below captures the percent of respondents that perceived a net improvement in the current week from the previous. For example, each point in the top panel is computed as the percent of respondents who described their perception of overall economic activity as improved over the previous week minus the percent of the respondents who described their perception of overall activity as deteriorated over the previous week. The middle and bottom panels are constructed analogously, capturing the labor market and price level, respectively.

The graph in the bottom panel below is a snapshot in time, capturing student responses for the most recent week available.

Please note:

1) The number of respondents changes over time as my class sizes differ.

2) I update this graphic weekly, with omissions for intersessions periods (summer, winter break, etc...).

3) You can click here for a larger image of the time series graph, or click here for a larger image of the point-in-time histogram.


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