The Region's Economy Column

Consumer spending is often the fuel that propels an economy from a recession through its recovery phase. During this holiday season, retailers are carefully watching consumer activity, hoping there is strong spending propulsion in the “make or break” months of November and December. Ohio government officials also have an interest since retail sales tax receipts account for more than 40 percent of the state’s revenues. The UC Economics Center analyzed economic conditions underlying retail spending in Ohio and predicts a 3.3 percent increase in retail spending for November and December.

Throughout the world there seems to be more emphasis on investing in higher education as a source of economic growth. Most research on this type of investment indicates that the returns are substantial, both in developed and developing countries. In the United States there are many areas, such as the Research Triangle in North Carolina, where higher education has propelled growth. In studies produced by our Economics Center, results are similar for Cincinnati - higher education is a good investment.

Fifty years ago the United Nations, recognizing the global dangers of illicit drug use, passed the 1961 Single Convention on Narcotic Drugs. Ten years later, President Nixon signed legislation establishing the War on Drugs. For the past 4-5 decades we have been aggressively pursuing the prosecution of drug users, producers and distributors. A sobering assessment was released by The Global Commission on Drug Policy just one month ago.

On April 18, we received a wake-up call when Standard and Poors put the federal government’s debt on negative watch. It is a serious warning that some observers feel is a possible first step to downgrading U.S. bonds from their AAA rating. It is crucial that Americans understand what this means for our nation, our families, and our jobs. When Congress later this month debates raising the debt ceiling, all of us should pay close attention.

It was a little more than a year ago that some observers of the economy were warning us about the likelihood of price deflation and the negative effects that would have on the economy. That seems to have passed; now inflation is a concern for many. So, let’s start with a basic definition. Inflation is a general and sustained increase in overall price levels. Another way of thinking about inflation is that it is a general and sustained decrease in the purchasing power of money. Thus, with inflation what is in our wallets today will buy us less tomorrow.

As the recovery from the Great Recession unfolds, it is apparent that once again employment will be one of the last areas to show significant improvement. Where will increased employment come from? The Kauffman Foundation, a large foundation devoted to entrepreneurship, gives one possible answer to this question. It has conducted extensive surveys which show that business startups inject new energy into the economy by acquiring new knowledge and technologies, creating new jobs, and providing new goods and services.

Our economy seems to be moving toward what many call a “new normal.” Whether this will be better than the old normal will depend on how we approach fixing the problems that provoked the recent economic crisis. People may disagree about the causes of our economic problems as well as ways to fix our financial markets, but they do agree that there is a problem. Unfortunately, little attention has been given to a crucial fact facing all of us: a large number of Americans have had little education in person finance and money management.

Would it surprise you to learn that many economists are very interested in the effectiveness of education? A look back in history will give us the reason.

Nearly 50 years ago, economist Edward Dennison began his research on what made the greatest impact on economic growth. Not surprisingly, he found that increasing the amounts of land, labor and capital used would increase production. He also found that improvements in the quality and productivity of these resources led to even greater growth.

By David Holthaus • dholthaus@enquirer.com

The 2012 World Choir Games, to be held in Cincinnati, will have an estimated economic impact of $73.5 million, according to a University of Cincinnati report released Thursday.

The impact includes direct spending of $36 million by the operators and organizers of the event, participants who will stay at hotels downtown and elsewhere, and by spectators. Indirect spending accounts for the rest of the estimated impact.

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This is the time of year when many people look forward to their vacations and family entertainment. The arts and entertainment industries are gearing up to present an array of appealing choices. Across the nation, regions will compete to attract tourists and their spending. These tourists represent an infusion of new money into an economy and usually provide a welcome boost to the region. Over the years, the UC Economics Center has measured the economic impact of many of the Cincinnati’s regional entertainment and art venues and, for this column, we have updated some of our findings.

Recent concerns about employment and the economy have been exacerbated by a local unemployment rate over 10 percent. While everyone has felt the effects of the recession in some way, men and women likely have experienced the economic environment differently in terms of employment.

Now that some of the worst economic news seems to be over, it is instructive to look at how Cincinnati did over the past few years. Our Economics Center looked at indicators critical to the well-being of a region. We selected eight metro areas for comparison: Cincinnati, Cleveland, Pittsburg, Minneapolis, Columbus, Indianapolis, Detroit, Memphis and Salt Lake City. We also compared the Cincinnati metropolitan area to the nation as a whole.

It has been a long and difficult year for retailers. They’ll be watching us this holiday season, hoping we can help them get what is most likely tops on their Christmas list—some good sales news. Will the recent improvements in the economy translate to increased spending? At this point in time, the answer to that question is a definite “maybe” since signals indicate that consumers have good reasons both to spend more money this holiday season and to keep their wallets shut.

During the past year, the real estate market and the foreclosure crisis have received considerable attention.  Reports about the number of bank owned properties in neighborhoods, new building permits and home sale prices are a regular part of economic news.  While the real estate market has dominated the debt discussion until now, other forms of debt are no less important to our economic health and recovery.

A standard convention exists for assigning the beginning and ending dates of a recession, typically undertaken by an organization of economic researchers, the National Bureau of Economic Research (NBER); however the chronological end of a recession does not necessarily coincide with an immediate improvement perceived by households and individuals. There is conflicting news: many aspects of the economy are improving - namely the stabilization of the stock market and new sales of homes while on the other hand, unemployment numbers continue to be dismal.

Recessions force changes, especially in human behavior. Will we, as individuals, learn anything from this recession? We can be quite sure that it will change us in the short term but we really don’t know how it will affect us in the long term. Perhaps lessons from the past and insights from others may be instructive.

The list of causes for our financial crisis has grown long, including the aggressive interest rate policy of the Federal Reserve Bank, greed, the poor enforcement of regulations, and the government's long tradition of promoting home ownership. In addition to the missteps of federal regulators and businesses, millions of individuals also made mistakes, buying houses they could not realistically afford and racking up substantial consumer debt. Careful observers of the economy now suggest that many individuals in the U.S.

As the current recession plods along, and perhaps deepens, a recurring question haunts us: How could such upheaval in the financial markets have happened in the world’s strongest country?

Recent economic turbulence has put tremendous pressure on businesses -- some of them have sought assistance by asking the government to purchase their bad assets or to extend an infusion of capital into their business through purchase of stock.  The effectiveness and appropriateness of these new approaches are now being debated.  A more traditional alternative for a struggling company is to file for bankruptcy.  Bankruptcy is a scary word to many people – it is often thought of as the end.  If the company filing for bankruptcy decides to liquidate all of its assets and distribute t

Recent economic shocks to the financial sector have surprised consumers and investors and have shaken, if not traumatized their confidence. During the past several weeks, we have witnessed economic events that most Americans have never before experienced or imagined. Many people have asked me how these events will affect our local economy. The short answer is that I am not sure; at the same time, I don’t know of any serious observer of our economy who can predict confidently how these events will play out, and what effects on the Greater Cincinnati economy are to be expected.

It is clear that since 2000 the number of jobs in the manufacturing sector has decreased sharply. It is true for Cincinnati—an 18% loss; and it is true for the nation as a whole—a 20% loss. These large decreases raise concerns that our manufacturing sector is deteriorating. Collective fingers are pointed at the flood of imported goods from China and the off-shoring of services to India—both stemming from the availability of cheap labor.

Since the 1980s the unemployment rate in the Cincinnati region has fallen from 7.4 percent to 4.7 percent. This remarkable decrease in the unemployment rate is largely due to vibrant employment growth, 80 percent of which was created by small businesses.

Each year, Fortune magazine compiles and publishes a listing of the top 500 American public corporations. The Fortune 500 Companies are measured by their gross revenue. A fair share of companies headquartered in the Cincinnati region continues to get ranked on the Fortune 500 list. The Cincinnati region is host to 10 Fortune 500 firms — more than Boston, St. Louis, and Seattle. Even more impressive, Cincinnati, which has almost 5 companies per million residents, ranks, on a per capita basis, third in the nation with respect to the number of Fortune 500 companies.

On January 4, 2008 the word “subprime” was chosen as the 2007 Word of the Year by the American Dialect Society. Its definition: a risky or less than ideal loan or mortgage. In the first month of 2008, the word “recession” has come to the fore. The concern seems to be not its definition, but whether or not it will occur this year.

This is the time of year when many employees are filling out their health insurance enrollment forms, while those without insurance are hoping to stay well.

Last week, the Economic Advisory Committee to the Cincinnati USA Partnership for Economic Development, on which I serve, presented their report on the future of the economy at the national and local levels. Given how difficult it is to accurately forecast the economy, the committee has been remarkably successful. This year we agreed that the local economy would be slowed by a lethargic national economy. We disagreed about the extent. While we were aware of problems specific to the Cincinnati area, we had more optimistic about the local economy than we have had for quite a few years.

Last month, I heard several well-founded and optimistic forecasts about the future of employment and growth in our local economy. If true, these forecasts will break a trend of bleak growth data since 1990. The statistics show that the Cincinnati Metropolitan Statistical Area (MSA) has lagged behind the nation and other U.S. Metropolitan areas since 1990. The reasons for this poor performance -- including the industrial make-up and slow population growth -- have been widely discussed.

Looking for a good investment that has outperformed almost anything else for the past several decades? Try education. The returns to higher education have been well documented – they are broad and substantial.