Half way through the year, we are still trying to figure out where the economy is headed — over a cliff or sputtering back to life? An article in The New Republic says the discouraging May jobs report could mean we are entering the second Great Depression unless there are more stimulus programs from Washington. Other economists say one-month changes are unimportant and we need to look to longer trends.
Another unresolved question is why the Washington economy, seemingly in an advantageous place, is not doing better. More on that below.
One of the problems with economic statistics is that the ordinary person is lost in the size of the U.S. economy. When prices are measured across 150 million workers in a $13 trillion economy, individual circumstances are drowned in a sea of data.
Let me illustrate with a little example. I was at a Mariners game a few years ago when the buzz started that Bill Gates was there. The 40,000 or so people who attended that game probably represented a cross section of the region. The crowd probably reflected the per capita personal income of a Seattle-area resident then, about $50,000. They owned homes or rented apartments. They were kids, couples, grandparents, or young adults on a date or with friends.
Counting homes and other assets, the crowd might have had an average net worth of $250,000 a person. But Bill Gates walks into Safeco Field to watch the game and suddenly things change. With his Microsoft stock alone worth more than $40 billion at that time, average — keep that word in mind — average net worth per Mariners fan that night jumped to $1.25 million.
The same thing happens to overall economic statistics. When you count so many people, so many businesses, and so many different regions, a couple living in their family home on a fixed income finds their own situation misrepresented by those broad-average economic figures. There is a classic definition of a recession vs. a depression: A recession is when your neighbor loses a job; a depression is when you lose a job.
Back to that June 3 jobs report. It points to an economy that is hitting a slow patch. But it is not an overall economic slump. In an economy as large as the U.S., the overall picture distorts what might be happening in individual regions; so you need to disaggregate the data. Some regions may be doing better than others. Are we? We ought to be.
The Federal Reserve puts out its "Beige Book" every six weeks or so. It is a compilation of reports from the 12 district banks that make up the country’s central bank. In the Twelfth District, which includes Washington and the West Coast, the June report was upbeat: “Twelfth District economic activity continued to expand at a moderate pace during the reporting period of late April through the end of May.”
At the Atlanta bank, it was a different story: “Sixth District business contacts reported that economic activity moderated somewhat in April and May. Retailers experienced a deceleration in sales and traffic, which they attributed to periods of adverse weather and high gasoline prices.”
Overall, here is what the Fed said about the economy: “Reports from the 12 Federal Reserve Districts indicated that economic activity generally continued to expand since the last report, though a few Districts indicated some deceleration. Some slowing in the pace of growth was noted in the New York, Philadelphia, Atlanta, and Chicago Districts. In contrast, Dallas characterized that region's economy as accelerating. Other Districts indicated that growth continued at a steady pace.”
So if that is true, if places like Seattle and Washington state are doing better than the rest of the nation, then the data should reflect that. However, that’s not the case.
The state on Thursday issued another gloomy forecast for the state's economy with the only bright spots in technology and aerospace. Construction in particular remains in a slump, according to the June update. State revenues also are still under pressure. The Economic and Revenue Forecast Council said that "in the next biennium, weaker near-term revenue growth is expected to bring in $223 million less revenue than forecasted in March."
On June 15 the state Employment Security Department said that in May, Washington state lost 700 jobs on a seasonally adjusted basis. Even more surprising is the fact that the private sector was down 900 jobs while the public sector added 200 jobs over the month. The national report released earlier this month showed the reverse, with the private sector adding jobs (albeit anemic) while the public sector continued to lose lots of jobs.
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