An interesting article came through my Twitter feed today. Apparently Moody’s Economy.com and MSNBC are collaborating on a project to measure of the economic health of 381 metro areas and the 50 states. You can find the description here and the numbers here. According to the interactive tool on the site, Lexington entered into the current recession between April and May of 2008. This is entirely common, often recessions are confirmed well after the fact as the data trickles in and can be analyzed. The differences between April and May are below.
There are a few things that give me pause about these reports. Number one, four variables are probably insufficient to diagnose the health of any economy, even a local one. The variables they used, however, are good indicators and I’ll accept at face value that they are a good representation for the purposes of their website.
Number two is that what often takes the longest amount of time is the calculation of each individual metro area. In Lexington’s case, it takes between 18 months and 2 years before the Bureau of Economic Analysis reports the official numbers. I wondered how Moody’s and MSNBC could come up with the data so quickly until I read the description behind the data. While employment and single family housing starts are easy enough to find, industrial production is quite another matter. They are taking national data (available month-to-month) and pro-rating it based on our manufacturing employment in the area. This doesn’t necessarily make the data wrong, just subject to interpretation. If you feel that the national automobile manufacturing industry, for example, mirrors our local automobile manufacturing industry, then the data is probably relatively reliable. If you feel, however, that the strength of Toyota, compared to GM, Chrysler, and the industry as a whole, puts us in a different category, then time will tell that Moody’s and MSNBC may have jumped the gun.
Number three, I wonder what criteria they use to justify when a metro area economy is actually in a recession as opposed to just “at risk.” You can see that our employment (seasonally adjusted, no year-to-year patterns here) fell by .45% and out industrial production fell by .77%. But our single family housing starts were about 10% better (although still negative) and our housing prices were up slightly. I guess employment and industrial production weigh heavier in their economic model.
Nevertheless, I don’t think I could find anyone who doubts we are in a recession at the moment. It will be interesting to see, as this recession plays out and our economy begins to grow again, what led to the biggest economic recession in my young lifetime. Hopefully there will be lessons learned to avoid it the next time around.