Leading Economic Indexes for New York State and New Jersey

[...]This article describes a method by which we may moreaccurately predict regional economic activity. Specifically, wedevelop an index of leading economic indicators (LEI) forNew York State and for New Jersey over the 1972-99 period.We extend our earlier work (Orr, Rich, and Rosen 1999), whichuses the dynamic factor model of Stock and Watson (1989,1991) to estimate an index of coincident economic indicators(CEI) for each state and to date each state’s business cycles. Wedefine the LEI as the forecasted growth in each state’s CEI overa nine-month horizon. The forecasts are constructed using a single-equation model, where the set of leading indicatorsincludes the national index of leading economic indicators andan interest rate spread as well as state-level changes in the CEIand housing permits.[...]