The educationese buzzword of the moment is STEM, as in science, technology, engineering and math. So to get back to the business of learning in the new year, let’s exercise our STEM brain muscles by working on a simple calculation.
Let x stand for the expected growth rate in the economy, be it regional, statewide or national, in 2013. Variables a through w represent economic influences including (but not limited to) tax rates, interest rates, Boeing jet sales, the price of oil, the price of natural gas, home prices, home foreclosures, the stock market, the growth rate of China and Europe, the length of lines outside the Apple store for whatever gizmo the company introduces this year, the number of column inches devoted to “the future of Microsoft,” the number of column inches devoted to the fifth-year anniversary of WaMu’s demise and the state of the banking system.
By the way, we’re not going to supply any of the data to substitute for those variables, nor will we tell you the relationship between them – which are added to, subtracted from, multiplied by or divided into one another – whether they’re accompanied by any constants or even if they’re positive or negative. Those you’ll have to guess at.
Now, please solve for x.
Really, is making an economic forecast for 2013 any more straightforward than that?
Economic forecasting, at least around these parts, used to be a bit easier. Boeing’s selling a lot of planes and hiring anyone upright and breathing? That’s what you’d call a positive indicator. Boeing’s laying off workers by the hundreds? Umm, not so good.
Of late we’ve added a few more reinforcements to the regional economy, principally in the tech sector in the form of companies like Microsoft and Amazon (technically a retailer, but considered a tech-sector leader in a way companies like Macy’s and Target never were).
Combine those with some of the broad national factors, and we ought to produce a number from our equation above that has us thinking it’s perpetual Christmas.
Boeing has been selling a lot of planes and it has been hiring workers; while the pace of hiring might slow next year, it will still need workers to replace the sizable cohort of those who are at or nearing retirement age. So too will all the suppliers, subcontractors and vendors that make Boeing go.
Look at what else is in our favor. The tech sector continues to do well, boosting income levels. Washington’s ag sector remains a stellar performer, aided by good production here and poor harvests elsewhere. Interest rates continue to hold credit costs down (provided you can get approved for a loan, and of course this isn’t good news for savers and investors). Natural gas prices continue at low levels not seen in years, and oil prices have moderated. The housing industry, if not fully recovered, is showing signs of improvement. Ditto banking and retailing, two other problem children of the Great Recession (the media business, however, remains a mess, but that’s our fault and problem).
So where’s this perpetual Christmas of which we speak? Why don’t we feel better about where we are?
Let’s blame two factors. Uncertainty, for starters. The recession was recent (for many it’s not over yet) and deep enough that distrust of optimism remains rampant. It may fade over time – it has after every economic calamity – but not this soon. A well-founded sense of caution prevails.
The other is politics. Nationally, the dog’s breakfast of a fiscal cliff “deal” – or rather, the remains of a dog’s breakfast as processed by an unwell dog – should be enough to convince even the most casual of observers that no serious effort is being made to address the mounting deficits and debts, and that no economic recovery or momentum is beyond government’s ability to screw it up. On the state level, we have little idea of what to expect from the new governor, who ran on a platform half platitudes and cliches, half sops to his traditional political base and half borrowing from his opponent’s proposals (and yes, that math works about as well as Washington’s budget does currently). Given that, reluctance to commit to expansion is the prudent course.
By the way, the answer to the problem posed at the start of the column? That was it right there. Not in the form of a word, or a number, but in punctuation. As unconventional a test-paper response as it might be, in this case the most accurate forecast for the economy in 2013 is the question mark.Bill Virgin is editor and publisher of Washington Manufacturing Alert and Pacific Northwest Rail News. He can be reached at email@example.com