Pulse on the Economy

The economic and financial crisis in the European Union has both captivated and confounded many of us. What caused these disturbing problems? How can it be that a recession in the EU can affect the U.S. and our metro area?

In analyzing the causes of the crisis one can get caught up in the special circumstances facing individual EU countries. Let’s take a broader approach by considering a mythical country called Lowtech, which has not yet joined the Eurozone.

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.

Recently, Phil Izzo in a Wall Street Journal blog (Oct. 20) discussed the state-level employment forecast from IHS Global Insight, which indicated Ohio would be among the states experiencing the slowest employment growth through 2017.

On average the forecast indicates about 1.2 percent average annual job growth in Ohio. Kentucky and Indiana are expected to perform slightly better, with 1.4 and 1.5 percent average annual employment growth rates. As no estimates for areas smaller than states were reported, it raises the question of how our region is expected to fare in the future.

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.

Source: Cincinnati Enquirer

Every 10 years, the House of Representatives is reapportioned according to a Census that is required by the U.S. Constitution. As a result of the 2010 Census, there will be no changes in number of representative for Indiana (9) or Kentucky (6), but Ohio will fall from 18 to 16. State legislatures throughout the country will be reapportioned through a similar process.

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.

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.