I am interested to see how the "business cycle" is associated with our firms sales. The hope is that if we can show that our sales line up with the business cycle then we can make decisions accordingly.
If, for example, our sales have historically been hurt when in a recession, then it would be good to keep a pulse on this macroeconomic factor to know when we should increase or decrease spend.
The problem is that I am not sure how to identify the business cycle. I am not an economist by trade. I have been pulling some data from FRED, but I am not sure which indicators to look at for identifying the business cycle. I have two hypothesis:
Unemployment. Record low unemployment may be an indicator for a recession. I think that this is getting slightly more convoluted these days as I think that employment takes into account people with either W-2s or 1099s, but as the people who rely solely on 1099s increase I think that the meaning of unemployment changes. Something like a gig economy effect. This makes this metric maybe less reliable than it used to be as the gig economy becomes a reality.
% difference in real vs potential gdp This metric seems to ask, 'Is real gdp exceeding potential gdp'. I don't understand how it is possible to have gdp exceed potential gdp, but I am not an economist so I don't need to worry about that ;). This does seem like an okay metric to represent the business cycle since it seems to quantify if real gdp is too high.
My above thoughts simplify to the following question:
If someone asked you to show him/her the the business cycle, what graph --- on FRED --- would you show that person?