ECON 423 - Problem Set #2

Time Series Properties of Economic Data

Due:Monday, September 29, by noon

Introduction: This problem set is based on material in Chapters 2 and 3. This problem set is designed to familiarize you with locating economic data on the internet and with the time series decomposition of economic variables. The problem set also provides additional experience with the linear regression feature found in spreadsheets and statistical concepts from Chapter 6.

Instructions: Go the the Bureau of Labor Statistics Local Area Unemployment Statistics web site http://www.bls.gov/lau/home.htm. Scroll down to the Get Detailed Statistics section and click on Most Requested Series link. This takes you to a page listing states. On this page, click on the link for Maryland. This page is a data retrieval applet similar to the one we used in the September 17th lab.
Alternate Data Retrieval: On Tuesday, September 23, the above link was not working. BLS was checking the interface. As an alternative, from the the Bureau of Labor Statistics Local Area Unemployment Statistics web site http://www.bls.gov/lau/home.htm. Scroll down to the Get Detailed Statistics section and click on the Create Customized Tables (one screen) link. In this applet, select 24 Maryland in Box 1, A Statewide in Box 2, AST240000 Maryland in Box 3, and click on Not Seasonally Adjusted in Box 4. After clicking on the Get Data button, you can use the More Formatting Options instructions below to select the series.

Check the box for the entire state, not seasonally adjusted data: 

MARYLAND, not seasonally adjusted - LAUST24000006
and click on the Retrieve data button. From this page, use the More Formatting Options link to retrieve the series from 1983 through 2003 (use the Table Format option. Download the following series: from January 1983 through August 2003. Read these data into a spreadsheet. Remove the annual average values and clean the text out of the fields. After completing these steps, you should have an Excel file with monthly labor force, employment, unemployment and unemployment rate data, seasonally unadjusted, for Maryland over the paeriod January 1983 - August 2003.


Your answers to the following questions below will be in a spreadsheet (Excel) file or a word processor file (Word, Wordperfect, etc.) depending on the question. Questions involving graphing, calculations, or regression analysis go in the spreadsheet file. Written responses go in the word processor file. Name the wordprocessor file ps2xxxxxxx.doc (for a Word file) and the spreadsheet fle ps2xxxxxxx.xls where "xxxxxxx" is your last name. Attach both the spreadsheet file and the wordprocessor file to an e-mail and send it to me before Noon on Monday, September 29.

Problem Set Questions:

  1. Describe the four data series on the file. What does each measure?
  2. Graph the unemployment series over the 1983-2003 period.
  3. Describe the time series properties of this series that you can see on the graph, in the context of the additive time series decomposition
    Y = T+S+C+I
  4. Remove the deterministic trend from the series using an appropriate regression model. Discuss the form of the trend you removed, write down the equation for this model, include the regression results in your spreadsheet, and discuss the results of this regression. Your spreadsheet file should include a seperate sheet with the detrended series clearly labled detrended!
  5. Graph the detrended data; label this graph "Detrended Data" and put it in your spreadsheet file. Describe the time series properties of this detrended series.
  6. Remove the seasonal variation in the detrended series. Use a 12 month moving average to remove the seasonal factors. Start this moving average in November 1983. Graph both the detrended series and the seasonally adjusted series on the same axes. Label this graph "Seasonally Adjusted data" and include it in your spreadsheet file.
  7. Discuss the merits and weaknesses of this detrending and seasonal adjustment process. What alternatives could you have used?