Published: May 04, 2008 12:02 am            

LUCINSKI: Ramblings of a mad economist

OK, before we go any farther; a confession. I’m not really an economist. A master’s degree in economics does not automatically grant someone that title. Economists usually have doctorates in the field, spend careers analyzing arcane theories and actually understand the concept of calculus. On those counts, I’m oh-for-three.

But the master’s level of academic training does focus one’s mind onto things that make normal people’s eyes glaze over; things like gross domestic product, changes in the rate of new unemployment claims and actions of the Federal Reserve Board. Eyes glazing over yet?

Because journalism concentrates on the real world and the people in it, it’s interesting to see how these sometimes obscure facts and statistics relate to our everyday lives. For all his faults (and there were many), President Bill Clinton got at least one thing right: It’s the economy, stupid. That theory was the guiding light that propelled him to two terms in the White House.

The health of the economy, in the minds of our citizens, can even trump the fact that we are at war. A recent survey of Americans showed that the No. 1 issue in this election year is not Iraq. It is the economy.

We know that our upstate New York economy is something of an anomaly. We always seem to be in a state of recession. But now that the bloom appears to be off the rose around the country, we’re getting the woe-is-us stories from the national media. There are stories of inflated home values coming back to earth, leaving the homeowners with bigger mortgages than the home’s market value; stories about folks losing their jobs; stories about 401(k) plans and Individual Retirement Accounts losing value because of plunging stock prices.

But are things as bad as some are making them out to be? Some of those dry financial numbers and economic reports are actually rays of sunshine among all the gloom and doom:

• Unemployment figures. Numbers released Friday show employers cut far fewer jobs in April than in recent months and the unemployment rate dropped to 5 percent, a better-than-expected showing. It wasn’t all that long ago that 5 percent unemployment was considered what economists (there they are again) call full employment in the U.S.

There are always folks who are between jobs, just entering the job market after school and training or are otherwise not working for reasons unrelated to economic conditions. If that figure gets below 4 percent, it’s an indicator of an overheating economy. So while 5 percent isn’t cause for celebration, it’s not all that bad either.

• Economic growth. Reports out last week indicate that the national economy last month grew by about .6 percent. Again, not great, but far from a recession (a word that many like to throw around these days). As long as the numbers are in the positive (albeit weak) column, the “r” word can be kept in the drawer.

• Dow Jones Industrial Average. Yes, stocks have recently taken a plunge, the average dropping from a record high of 14,000 to around 12,000. But now its back to about the 13,000 level and poised to go higher.

• Inflation. Now there’s something we need to watch. Although crude oil prices dropped a bit late last week, they remain historically high, well over $110 per barrel. That, of course, winds up as trouble at the nozzle of the gasoline pump.

And that leads to another concept that we thought we buried in the early ’80s: Ripple effect. It means that if the folks who grow and ship your food, or ship anything else for that matter, have to pay more for fuel, it’s passed through, raising the prices of the products affected.

Once the inflation spiral starts, it can be particularly difficult to break and frustrating for government officials to deal with. During the last round of severe inflation in the late ’70s and early ’80s (more than 10 percent per year), President Gerald Ford was reduced to passing out “WIN” buttons, standing for “Whip Inflation Now.” Suffice to say, that didn’t accomplish much except for providing fodder for late-night television comedians.

So, is the economy great these days? No, but the numbers show it’s not nearly as bad as it’s been at some points in the past nor nearly as awful as some would have you believe.

Dick Lucinski is the managing editor of the Niagara Gazette. His columns appear on Wednesday and Sunday.

        

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