US Macroeconomics Performance

AP JMHS Course Paper On:
Recent US Macroeconomic Performance and Prospects

I) Topic and Generic Outline
In this paper you systematically summarize the material you have been reading in the newspapers and online about the US economy. You will have read different authors, banks and blogs all of which present a particular view of the near-term prospects (or outlook) for the US economy. Which factors and policies seem like they will be the most important determinants of the future course of the economy?

You should note carefully the two quarter period that will be your “forecast period”. It will be posted on D2L.

This is a generic outline. It is typical for the economic outlook papers written by banks and other institutions year in and year out. You should deviate from it in order to emphasize issues that are especially important right now or to accommodate one or two issues that caught your interest and you want to emphasize. You could reorder the material and insert a section or two. You obviously can’t write about everything that I mention in the generic outline, but you should say something that speaks to the major headings: Labor, Demand, Financial Markets, Supply and International.

I) Introduction: Where is the US economy in the cycle? (Starting an expansion? Ending an expansion? When was the last “turning point” of the US economy?) Are the forecasts for the US economy split between optimists and pessimists, or do they all seem to say pretty much the same thing? What growth rate do you think is likely for the US economy in the forecast period? (This will be based on your reading and synthesis of professional forecasts.) What are the key issues that you want to draw special attention to in the sections that follow?
II) Labor Market Developments: What has been happening to the growth of jobs and wages? (Strong? Weak?) What are forecasters expecting? What about unemployment and participation rates? Are there some other important things about the labor market you encountered that you want to note?
III) Demand. The GDP report, especially table two “Contributions to GDP growth”, will tell you exactly which sources of demand have accounted for recent growth. The Atlanta FRB GDPNow forecast (or Nowcast) will tell you what seems to happening right now. The Dismal Scientist will also do this and forecast into the future. The forecast sources document on D2L has additional sources. Have you read anything about why particular components of spending (C, I, G, NX) have been weak or strong? You may want to say that you will come back to some of them later. (For instance, NX net exports reappear later in this generic outline.) Fiscal Policy affects spending directly through G and affects consumption via taxes.
IV) Financial Markets and the FRB. What has FRB monetary policy been and what is it expected to be in the near future? What have some important interest rates been and how are they expected to change? Have stock prices been rising or falling recently? Have you read anything about whether changes in the stock market have affected consumption or investment? Do you happen to have a strong opinion on what direction stock markets are headed?
V) Supply Side and International Linkages. Does the economy appear to be near or away from its potential output? How fast is potential output growing (due to the growth of productivity as well as labor and capital)? US exports and imports can be important influences on the economy. Have they been large recently? Is the US dollar expected to get stronger, weaker, or stay about the same in the near future?
VI) Conclusion. Which of the aspect of the economy you discussed above seem to be most important or interesting to you and why?
VII) References. A good mix of a few government reports, some economic outlooks from financial institutions, and newspaper articles you cited in the paper.
VIII) Tables and Figures. The first thing here should be your forecast table. An old version is posted on D2L. Your forecast table should have updated forecasts of some important variables from several sources. At the top of your table should be your forecast clearly labeled as yours. Your forecast could be an average of the forecasts you copied from professional sources, or you may have a forecast that is remarkably different than the consensus.
You should attach at least a few additional graphs or tables. These should be numbered (Figure One, Figure Two, etc.). Each figure should be discussed in the paper and should have had an important influence in shaping your thoughts or the argument of the paper. Attaching random material will significantly reduce your grade. Be selective and thoughtful.

II Evaluation Criteria
1. Clarity of Forecast and Cyclical Positioning
a. Is there a clear forecast table in the appendix and does the paper make good use of it?
b. Has the economy been expanding/contracting?
c. What are the chances that it is presently at a turning point?
2. Range and Depth of Sources
a. Is there a mix of sources from i) original gov. releases, ii) short articles and commentary from the press, iii) longer forecasts and outlooks from financial institutions?
3. Coverage of Sectors
a. Is there coverage of:
i. leading-coincident indicators
ii. labor market conditions
iii. GDP growth and its components
iv. indicators of inflation and borrowing costs
v. productivity and profitability measures
vi. exchange rates and their importance for US imports and exports
b. Does the paper explain how these parts of the economy are interrelated?
4. Style
a. Is it clearly written and easy to follow?
b. Are sources acknowledged and properly cited? Do the citations and list of references coherently and consistently document these sources?
5. Cohesion and Consideration: Do the parts of the paper reinforce each other and work towards a cohesive, thoughtful, overview of the economy?

III) Length and Proper References

The paper should contain 5-10 pages of text, double spaced. You may either insert or attach at the end a variety of tables and graphs you think important. Never attach or insert an object which you do not talk about in the paper! Do remember that I expect a list of references at the end of the paper, and proper citation of material throughout.
I am not greatly concerned about which style of references you use so long as it is a well-respected standard and consistently used. An easy style of references is Turabian Author Date. Click the Author Date Tab on the following page:

You must avoid plagiarism. To do so cite sources you have relied upon and use quotation marks or indentation to indicate text written by others. Plagiarism is
“..a major form of academic dishonesty involving the presentation of the work of another as one’s own. Plagiarism includes but is not limited to the following:
a. The direct copying of any source, such as written and verbal material, computer files, audio disks, video programs or musical scores, whether published or unpublished, in whole or part, without proper acknowledgement that it is someone else’s.
b. Copying of any source in whole or part with only minor changes in wording or syntax, even with acknowledgement.
c. Submitting as one’s own work a report, examination paper, computer file, lab report or other assignment that has been prepared by someone else. This includes research papers purchased from any other person or agency.
d. The paraphrasing of another’s work or ideas without proper acknowledgement.
Plagiarism, like other forms of academic dishonesty, is always a serious matter. If an instructor finds that a student has plagiarized, the appropriate penalty is at the instructor’s discretion. Actions taken by the instructor do not preclude the college or the university from taking further punitive action including dismissal from the university” (DePaul Student Handbook).

In this assignment you GAIN points by citing a wide range of authors and sources so plagiarism would be totally counterproductive! Do mention discussions you have had with class mates if they have influenced your views or if you are sharing material. Each student must write their own paper.

IV Sources/Links (Don’t forget that 2DL has two separate documents on sources for following the economy and obtaining forecast table material.)

IVA) Some really good professional versions of the paper you are writing
These sources try to give their readers a professional overview of where the economy is headed and have numerical forecasts of the important variables.

1 Dismal US macro Outlook and forecast table. You will access the Dismal site through the DePaul library website.
2 Delloit University Press. Updated quarterly. Annual data forecasted.
3 PNC Bank, PNC’s National Economic Outlook
Scroll down to National Economic Outlook. Updated Monthly. Quarterly forecasts.
4 Kiplinger Economic Forecasts
5 FT’s one-stop overview of key US economic data and trends, including GDP, inflation, unemployment, consumer indicators, and the outlook for US interest and mortgage rates
6 Brown Brothers Harriman, Exchange Rate (Forex) Specialists
See their FX Quarterly Outlook

Here are some more—but the ones above should be plenty.

Morgan Stanley Search “Morgan Stanley” and “outlook”
The title of Morgan Sanley’s Outlooks varies, see their ideas page:
Kantar Retail, Retail Sales Specialists
Royal Bank of Canada
look for the Quarterly Economic Update covering USA and Canada
Prudential, for a bond centric quarterly outlook
Manufacturers Alliance for Productivity and Innovation (MAPI)
Quarterly Forecast for U.S. Economic and Manufacturing Growth
Investco. Look for most recent Quarterly Economic Outlook

IVB) Sources you will see me using often in class.
DismalScientist Go to the library databases and find Dismal . In addition to their economic commentary (which you can search for say “GDP report” or “productivity” ) it is worth examining their FRB links, Taylor Rule calculator, and Stock Market Calculator. They have a companion site that allows you to graph many variables not available via the Conference Board.

FRED The Federal Reserve Board’s Economic Data Base.
Super popular source for making graphs of and downloading nearly all macro economic data for the USA.

For the Government’s Economic Forecast for the next 10 years see the CBO. The Congressional Budget Office prepares the forecasts of the NAIRU, Y potential and Y the underlie the President’s Budget. Their current forecast for the US economy is available from their home page. The methodology behind these forecasts is discussed in some detail in documents found in the “Budget and Economic Outlook” section of their publications. Of particular interest are “CBO’s Method for Estimating Potential Output: An Update, August 2001 ” and “Description of Economic Models, November 1998” .

The Bureau of Economic Analysis generates the GDP report.

The Keynesian FairModel:
There is a very well-known Keynesian model of the US economy that traces its intellectual roots back to the Keynesian heydays of the 1950’s and 60’s at Yale University. It is Ray Fair’s FairModel at . We will discuss it in class towards the end of the course.

IVB) Some Issues and Variables by Paper Section

Leading Indicators
Review the behavior of the leading, lagging and coincident indicators.
Source: The Conference Board
look for “Download related PDFs” about 2/3 down page. This is free.
Tricky site, never pay anything!

The Labor Market
For the unemployment rate, employment rate, and labor participation rate see: “THE EMPLOYMENT SITUATION” monthly by the Bureau of Labor Statistics (BLS Also available via Dismal Scientist US Economic Indicators.

Productivity :The Bureau of Labor Statistics (BLS) has excellent resources on productivity. For labor productivity and labor costs see For “multifactor productivity” see
The San Francisco FRB for real time estimates of total productivity growth. The Bureau of Labor Statistics is more authoritative but tracks it with a longer lag

Output/Demand Components
Review the growth of output and its components: C, I, G, (X-IM).
Sources: The all-important “GROSS DOMESTIC PRODUCT” report from the Bureau of Economic Analysis (BEA Also available via Dismal Scientist US Economic Indicators. Table 2 of the GDP report tells us where growth has come from and the Dismal Scientist forecasts this table into the future. (It is found at the very bottom of the Dismal Scientist forecasts table.) The Atlanta FRB “now casts” this table for the current quarter as GDPNow.
The New York Fed also has a GDP ‘now cast’ but with less detail than the Atlanta Fed

Fiscal Policy
Review the contribution of G (government spending) growth to the growth of output. See the GDP reports table 2 which tells us the contributions of different types of spending to GDP growth. To look at the issue of the Full Employment Budget Deficit and the effect of automatic stabilizers go to the Congressional Budget Office Look for their ‘Update to the Budget and Economic Outlook’ it has a section examining the
“Deficit or Surplus With and Without CBO’s Estimate of Automatic Stabilizers, and
Related Estimates, as a Percentage of Potential Gross Domestic Product”.
The most influential think tank following fiscal policy is Brookings:

Review the movement of the GDP deflator and Personal Consumption Expenditure deflator found in the “GROSS DOMESTIC PRODUCT” report and more easily in FRED. Review the movement of the “Consumer Price Index”. Also available via Dismal Scientist US Economic Indicators. Review the movement of the “Employment Cost Index” from the BLS. Also available via Dismal Scientist US Economic Indicators.

Interest rates and Monetary Policy
Review the movement of the FRB’s Discount Rate and “Selected Interest Rates”.
You may wish to consult the “Summary of Commentary on Current Economic Conditions (Beige Book)” and “Federal Open Market Committee Meeting Minutes”.
The Brookings also follows monetary policy

Exchange Rates and International Payments
For the US Current Account see the BEA’s “Balance of Payments” report (BEA For the movement of US $ exchange rates see The FRED data base under exchange rates, especially the Trade Weighted Exchange Rates found at the end of the list.