Spreadsheet Project 1: Data Presentation and Interpretation

The objective is for each student to obtain and evaluate historical data obtained from one or more government or other web sites.  You should obtain one or more data series (spanning at least a decade but preferably more) relevant for measuring some aspect of recent macroeconomic performance and, using Excel, prepare a chart of the data. You must then write a brief commentary (no more than 250 words) about the data series.  The skills I want you to develop include finding data on web sites, putting that data into a form (tables or graphs) that is easily interpreted, then explaining to the reader what the data say about what is happening in the macroeconomy.   You must submit your work to me as a two-page document: Page 1 contains your name, project title, and commentary.  Page 2 contains the chart.

Due Date: February 1, 2011

Examples

This list is to help get you thinking about interesting topics:

• The overall unemployment rate is inching upwards: is that because the unemployment rate of all groups is up, or because the fraction of the population with high unemployment rates (especially young people) is rising?  Look at unemployment rates by group from the BLS web site to answer this.
• Consumers are spending much more of their income than ever (they are saving much less):  what are they spending money on?  Look at NIPA consumption and income data (Tables 2.1 and 2.2; Table 2.4 for gruesome detail) to answer this.
• Inflation has been quite moderate over the last few years: has the growth of all prices moderated? what has happened to items like medical and energy costs?  Look at BLS price index data to answer this.
• As inflation falls, long-term interest rates should also fall:  have long-term rates fallen as inflation fell?  Is the relationship stable over time?  To answer this combine inflation data from BLS and interest rate data from the Fed.
• The key to long-term economic growth is productivity, which is output (GDP) divided by inputs (mostly labor hours worked):  what has happened to productivity over time?  You will want to look at long time periods to do this right--back to 1950 or so.  To answer this, get GDP from BEA, and labor inputs (number employed times average hours) from BLS.
• As the U.S. economy has gone through its ups and downs over that last several decades, one chief concern has been our trade imbalance:  what has happened to exports and imports as a share of GDP and why?  What types of exports and imports are changing most rapidly?  To answer this, get NIPA data on exports and imports (Table 4.1) and be sure to look at trends relative to GDP.
• Recent deterioration in the outlook for the Federal Budget can be attributed to lower tax revenue (relative to GDP) and higher spending (relative to GDP): what types of tax revenue are falling, and what types of spending are rising?  Why are those trends occurring?  To answer this, use budget data from either CBO or the NIPA.  It is important to consider trends relative to GDP.
• One concern about the high growth economy in the last two decades has been a shift of income from wages to various forms of capital income, which makes the rich richer at the expense of everyone else:  what has happened to the share of GDP being paid out in wages and other forms of compensation?  What has happened to various forms of capital income (interest, profits, rent)?  How has compensation shifted from wages to other things like health benefits?  To answer this, use GDP data.  You could also look at average wage data from BLS.

Data Sources

Here are the basic sources for various types of data:

 BEA: Any data about GDP and components; includes product side variables like consumption, investment, exports and imports, as well as income side components like wages, profits, taxes, and transfers.  The data is available in PDF form for recent years, and in downloadable PRN files for long time-series.
 BLS: Any data about employment, labor force, and consumer/producer price indexes is on the BLS website.  Most of the data is in HTML form so it can be cut and pasted right into a spreadsheet.
 CBO: Any data about trends in Federal government receipts and expenditures can be found on the CBO web site, especially in various appendixes for the Economic and Budget Outlook document.  Note that most of the CBO data will be on a fiscal year basis; there are some government receipt and spending data in the NIPA, but those are mostly calendar year.  I don't care which you look at, just don't get confused when the numbers don't match.
 FED: Any data about interest rates and money supply will be on the Federal Reserve web site.  Most of the data is in easily downloadable HTML or Excel form.

These data sources can be difficult to work with, and there is a great way to cheat without me knowing: use prepared data from the Economic Report of the President.  This document has data from all of the above sources nicely organized and easily downloadable in Excel (xls) spreadsheets.  It is basically ready to go for creating tables or graphs (though do not just print their tables, or I will know you cheated).  This data is also a great source to check out if you are looking for an idea--sometimes the ideas come to you when you see what data is available, instead of vice versa.

Three Keys to Making Good Macro Data Charts

1. The chart should include all of the information that the reader needs to know about the graph. That means you should use clear titles and labels that describe the data, and list the sources for the data. Also, all macro data charts for ECON 375 should have your name as part of the graph itself—not hand-written on afterwards—so that authorship is clear.

2. The graph should show the data series in an interesting and informative way, which often involves data transformations prior to making the graph. In particular, that means you should not simply plot levels for variables that grow steadily over time. In those cases you generally want the reader to focus on either (1) how the growth pattern has varied over time, which means showing growth rates instead of levels, or (2) how the variable has changed relative to something else, which means showing the variable divided by that other variable. Examples of when it is appropriate to use growth rates include price indexes (the growth rate is then an inflation rate) or the level of aggregates like GDP. Examples of dividing through by something else include, for example, showing C, I, G, or X-M components of GDP relative to the total. Note that not all variables need transformations—for example, interest rates and unemployment rates can and should be graphed in levels. If this is confusing then think about what question the graph is addressing—does your presentation make it easy to see the answer to that question?

3. The graph itself should generally be uncluttered and clear, and should adopt the standards used in ECON 375. In general, the graphs you make for ECON 375 will not be in color (though some of your graphs for later projects might be) so they can be printed using any available printer. That means the color for all text and lines on the chart should be black—you can distinguish variables when there are two or more on a sheet by using dotted or dashed lines. It also means the background for the chart itself should be white—the Excel default is gray, and that should be changed on any graphs you make for this class. Another Excel default is to use markers for each data series—you should turn these off, and just show the lines. Also, the graphs for ECON 375 should generally not use legend boxes—any labeling should be done within the graph using text boxes, and you can use the Excel drawing tools to connect the labels to particular lines when needed (for some projects it may be necessary to use legends, though it can and should be avoided for most graphs).

(This project is adapted from Dr. John Sabelhouse at the University of Maryland)