December 5, 2003
Tracking the State Economy: It's a Whole Different Game
Surely you've heard some of the good news about the national economy recently. Third quarter growth in the overall economy, recently revised upward to a blistering 8.2 percent, is the highest we've seen in almost twenty years. That growth has been fueled in part by two consecutive quarters of galloping growth in productivity. Output per labor-hour increased in the non-farm economy by an incredible 9.4 percent last quarter.
Even manufacturing seems to be coming around. The last five months have seen increases in the Federal Reserve's Index of Industrial Production for manufacturing, and the November report of the National Institute of Supply Management's Purchasing Manager's Index indicates that the expansion in output is getting stronger.
Now let's take a moment to see how these indicators are performing in the Indiana economy. As you will see, it will only take a moment.
How is overall growth in the Indiana economy shaping up? That's a simple question to answer. We don't know. There are no quarterly data on Indiana Gross State Product, and annual data will only become available after a lag of about three years.
Are we seeing the same kinds of increases in productivity amongIndiana businesses that are showing up in the national data? Again, we don't know. We can get some information on productivity for manufacturing at the state level, but we have to wait several years before it is reported.
You can see where this is going. We'd like to tell you that Indiana's manufacturers are seeing a strong pickup in business akin to what is being reported nationally, but we really don't know that either.
Those answers surprise a lot of people. Many of us imagine statistical reports on the national economy as being produced with some kind of gigantic calculator. How, we might ask, can we know what things add up to and not be able to say anything about the individual pieces?
One answer to this question is that most data are compiled from surveys, and survey-based estimates are not produced by anything representing a calculator. It’s a bit like the Nielsen ratings of television programs -- they may do a great job of estimating viewership overall, but can't tell us who's watching what in Kokomo .
Other problems are more fundamental. When we add up Gross Domestic Product for the nation, for instance, we have to keep track of imports and exports. That's not too bad -- we've got customs offices and paperwork to help us. But how do you keep track of whatIndiana sells to Ohio ? Few of us would put up with paperwork and border checks at state lines just so a few economists can have fun with the data.
But mostly it boils down to money. It is ironic that in this, the information age, we are actually receiving less data than in years past on states and regions. Indiana retail sales data were discontinued in 1996. Information on industrial electricity sales, which are the basis for manufacturing output estimates, was drastically curtailed in the wake of utility mergers and acquisitions. And 2000 will undoubtedly be the last hurrah for the long-form Census that provides so much detail for even the tiniest communities.
Those of us who track the state and local economies have long learned how to adapt to this situation. We use whatever we can find -- employment, building permits, and state tax receipts -- to get a read on how the state is performing. But you should know that there are plenty of questions we just can't answer.
About the Author
Educational Attainment, the 21st Century Fund and the Future of SchoolingIndiana ranks 42nd in educational attainment.
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