Guest Editorial: Action has to trump waiting for the economyAs the new year begins, we are told that we are in an economic recovery that might be best described as a “statistical” recovery.
By: Lee Egerstrom, Lake County News Chronicle
As the new year begins, we are told that we are in an economic recovery that might be best described as a “statistical” recovery. That only means most economic indicators show slight improvement or are not falling as sharply as they had in most months and quarters of the past two years.
For most Minnesota households, the economic news spewing forth each day is often conflicting and any statistical improvement in the overall economy isn’t likely to be felt at home. So, let’s start the countdown hoping for better times in 2011, and let’s also think about public policy options that might help bring about a brighter future.
Let’s look at the economy piecemeal, with some comments that seem appropriate at this writing.
In October, the National Association of Business Economics released a study saying that 80 percent of the economists it surveyed believed the recession had ended, but they had little excitement about what it would do for most people.
Subsequent data reports suggest the economists were right. The New York Times reported last week that preliminary data show retail sales between November and Dec. 24 increased by 3.6 percent – but that was measured against a dreadful holiday shopping season in 2008.
Retailers will announce actual results this month. Some forecasters fear the preliminary gains will disappear when more comprehensive data are tallied.
The eventual retail results will need to be examined carefully because the retail sector accounts for about 70 percent of U.S. Gross Domestic Product. A real recovery implies that we will restore the economy that existed before the start of the current recession.
Don’t make that assumption: an economy in which American consumers sop up what everyone else in the world makes is unsustainable. We have to do things – make things – to generated purchasing power to restore the retail sector for more than a holiday binge.
On the industrial and business service fronts, the newspapers in the Twin Cities area published weekend reports looking back at the past year and past decade. The reports were too extensive to summarize here, but they were mostly painful reading.
The Federal Reserve Bank of Minneapolis, meanwhile, issued its forecast for 2010 on Dec. 21 for the multi-state Ninth Federal Reserve District. More painful reading with a forecast that Minnesota will lose another 11,400 jobs in the year ahead – a 0.4 percent decline in jobs.
The rural economy is forecast to see some improvement in 2010 as the livestock sector is expected to rebound from a disastrous 2009. But again, this is a statistical rebound and not a restoration of good times out on the farm and in farm service communities.
Such an outlook will keep consumers cautious or without means to fuel a recovery for retailers, and will undercut the heavily damaged housing market that depends on consumer confidence.
The latter is key to a meaningful recovery for what it means for restoring economic activity and the financial institutions that stoke commercial activity.
Christopher Snowbeck, writing in the St. Paul Pioneer Press, shows the weakness in the housing market and consumer confidence. St. Paul has several homes owned by the Housing and Redevelopment Agency priced from $1 to $50,000 that need renovation. Only three offers have been received, and only one is likely to be accepted, the report stated.
What’s more, Snowbeck quotes housing experts as saying potential buyers are having trouble accessing loans that would be needed to do the renovation work. It’s back to the same old problem. Lenders have trouble finding credit worthy borrowers in this economic climate, and are under regulatory pressure to curb lending to restore bank balances, and at the same time potential buyers lack confidence in the economy to take on debt.
Minnesota 2020 does have a proposal that could restore borrower and lender confidence in the housing market that deserves serious and immediate attention when the Minnesota Legislature convenes in February.
Meanwhile, state officials, lawmakers, local and regional leaders and nonprofit sector thinkers all need to examine ways to use bonding authority and federal economic development programs to spur business and infrastructure development activity. Such actions are needed to produce a real and sustainable economic recovery that affects people and businesses, not just statistics.
The economists’ forecasts are clear enough. If we bide our time waiting for something good to happen, we may be waiting a long time.
Egerstrom is an economic development fellow with Minnesota 2020, which bills itself as a “progressive, non-partisan think tank, focused on what really matters. We focus public policy debate on the issues that matter for Minnesota’s future success.”