Developing a Leading Indicator Series for a Metropolitan Area

Abstract

In this article, a composite leading indicator of employment conditions is constructed for the Milwaukee, Wisconsin metropolitan area. This index contains both purely local data series and several national data series. After describing the process for constructing this index, we explored its ability to accurately track and anticipate employment conditions, both in a purely after-the-fact review and in a more stringent "real time" simulation. The overall conclusion is that this index does an effective job of signaling changing employment conditions. This effectiveness, combined with the simplicity and flexibility of the index construction process, indicates that such an index can be useful to economic developers and others interested in tracking local employment conditions.