Economic Indicators Paper

Topics: Inflation, Unemployment, Economics Pages: 5 (1536 words) Published: December 11, 2005
Economic Indicators Paper

What does it mean when someone refers to the health of an economy? Furthermore, how can one classify an economy? Americans love to quantify data. Because of this inherent need to compare data, economists have developed a way to collect nearly every type of statistics that may reveal the general health of the economy. These statistics actually tell if the economy is productive and efficient or if it is slow and inefficient. Included in these statistics are Gross Domestic Product (GDP), Consumer Price Index (CPI), Unemployment Rate, Retail Sales, Producer Price Index (PPI), and Personal Income. Included in this paper, Team A defines the preceding six indicators, and describes their status. Additionally, a historic trend graph will illustrate these six indicators. Impact of Real GDP

Gross domestic product or GDP is the broadest measure of the health of the US economy. Real GDP is defined as the output of goods and services produced by labor and property located in the United States. The GDP generally lags other indicators' release dates. As such, other indicators "build up" to the market's anticipation of how the GDP numbers describe the state of the economy. Real GDP is an important indicator to track because it provides the greatest and broadest sectoral detail of any other series. The data associated with GDP reflect income as well as expenditure flows. Sectoral coverage includes durable and nondurable goods, structures, and services. In addition, price data by sector are available for detailed subcomponents. Because of

the detail available in the GDP reports, this series provides comprehensive information on supply and demand conditions, including information for various types of developing imbalances over the business cycle. Real GDP is a quarterly figure, but released on a monthly basis with an initial estimate referred to as the "advance" estimate with two subsequent revisions over the following two months. The Bureau of Economic Analysis (BEA) produces the GDP figures and releases the advance estimate, generally during the fourth week of the first month following the reference quarter. That is, the first quarter advance estimate is published in late April, and subsequent first estimates are released in July, October, and January. The first revised estimate for a given quarter is known as the "preliminary" estimate, and the third estimate for a given quarter is called the "revised" or "final" estimate. Annual revisions are usually released in July with the first figures for the second quarter. They cover the three prior calendar years and the quarter(s) already published in the current year. Benchmark revisions occur about every five years with the base tied to a recent quinquennial economic census as the Census Survey of Manufacturers. Unemployment Rate Indicator

The unemployment rate is an important economic indicator. This rate indicates how many people would like a job, but unable to find one. The unemployment rate is calculated by the number of unemployed workers divided by the number of people in the labor force. According to the US Department of Labor, the annual Unemployment rate in 2004 was 5.5 and 6.0 in 2003, which was a decrease of .5 over the prior year. As one can see from the graph below the rate in 2004 was 1.5 higher than in 2000. This means that the US employment rate was significantly lower in 2000 than in 2004, but has shown some improvement since 2003. The decrease in the unemployment rate tells individuals that the economy is starting to upturn and the more businesses are able to increase employment due to demand of their services or products. It is hoped that the unemployment rate will continue to lower in 2005, which will help the US economy become more prosperous. The Inflation Rate as Measured by the Consumer Price Index

Inflation has been defined as "a process of continuously rising prices or of the continuously...

References: Bureau of Economic Analysis: US Department of Commerce (2005) Local Area Personal Income. Retrieved January 23, 2005 from
Cftech Bank Gross Domestic Product (2005). Retrieved January 23, 2005 from
US Census Bureau (2005). Advance Monthly Sales for Retail and Food Service. Retrieved January 21, 2005, from
US Department of Labor (2005) Labor Force Statistics from the Current Population Survey. Retrieved January 16, 2005 from
US Department of Labor (2005) Labor Force Statistics from the Current Population Survey. Retrieved January 23, 2005 from
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