The Metropolitan Business Cycle Index

Here is one you might want to replicate for your area. The Federal Reserve Bank in Dallas developed a very handy metro level business cycle index. Here is a little information to get you thinking about the tool.

The frequency and severity of cyclical swings in a local economy are important to businesses and consumers because such cycles impact production and inventory decisions, employment and unemployment. Analyzing the overall direction of a local economy, however, can be difficult and confusing. Often the handful of local economic indicators gives mixed signals. For example, if the unemployment rate and job growth both increase, is the local economy picking up or weakening? Often it is not clear.

To more clearly define regional business cycles, the Dallas Fed has developed composite indexes that aggregate the movements of key economic indicators for nine Texas metropolitan areas. The Metro Business-Cycle Indexes use statistically optimal weights so that movements in the indexes best represent the underlying co-movements in the indicators and thus the underlying state of the economy. The long-run growth in the indexes is set equal to growth in real personal income. The indexes are constructed using the same statistical techniques as the Texas Leading Index.

Read more here.