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All recessions are local
Wednesday, March 05, 2008
There's a pretty cool interactive graphic in this story at USAToday today. They make the same point that realtors like to make these days - all recessions are local.
Just look at the farm belt - no recession there - nothin' but green.
You can mouse-over a state and they'll pop up a list of major metropolitan areas with green, yellow, and red lights to indicate the current economic conditions for each area. The entire California central valley is one, big red-light district, as is the entire state of Nevada, some areas in more ways than one.On the campaign trail and in homes across the USA, the debate is underway about whether the U.S. economy in 2008 will see its first downturn in seven years.
Yes, and those states had the biggest housing bubbles (well, except for Michigan where, sadly, they got a housing bust without the preceding boom).
Despite the recent onslaught of negative news, it remains unclear whether the current state of affairs meets the economists' definition of a recession: a widespread decline in economic activity lasting more than just a few months. As in politics, all economics is local.
Mark Zandi, chief economist at Moody's Economy.com, for example, believes the U.S. economy is in recession.
But the contraction is far from uniform. Zandi's firm estimates that in January, 30 state economies were expanding while 15 were "at risk" of slipping into recession.
Arizona, California, Florida, Michigan and Nevada were already in a recession at the start of the year. Those states account for one-quarter of the nation's total economic output.
Just like when they said there was "no national housing bubble", maybe economists and elected officials can start saying, there's "no national recession".
No, probably not - there exists a comprehensive set of economic statistics and an entire agency tasked with the job of defining exactly when a national recession starts and stops.
Maybe if there had been a similar staff to determine when financial bubbles start and stop we wouldn't be in the current mess.
3 comments:
I suppose that USA Today and the economists they talk to believe that the only economic problem we have is the bursting housing bubble - which does differ by locality. It's hard to understand why the collapse in financial derivatives would be localized, or the price of fuel, or the borrowing of billions for the Iraq War, or the fall of the dollar.
As California goes, so goes the nation.
Most of those states not yet in recession depend on the support of those that are.
The problem is, by definition you can not know when a recession started for at least 6 months after it began. Although technically GDP is not used now (no one knows what their criteria is anymore), real GDP has been inflated by a fictitiously low CPI, hedonic adjustments, consumer debt=spending, and the housing bubble. Using GDP as the criteria, adjusted for the deception and bubbles, and we have most likely been in recession for most of the 21st century, except for a couple of quarters in 2004 due to the tax cuts.
Our population has grown 22 million since 2000. But only 1.6 million non-farm jobs have been created since 2000. WTF? That can't be right, can it? What are they doing, farming?
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