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Business journalists need to keep an eye on lagging indicators

By Randall Smith

All is not well.

Despite a continuing bounce in the stock market, there remains a widespread series of economic indicators that continue to lag behind and deserve special coverage from business journalists.

Depending where you live, those indicators will mask a recovery and continue to trouble certain regions of the country. And, in some places, such as the coastal regions, the difficulties may be enough to create widespread political fallout for whatever political party is in power.

These are some of my conclusions from talking to economists, listening to panel discussions at the Society of American Business Editors and Writers recent meeting and private reports on sensitive sectors of the economy.


The three largest lagging indicators of the coming recovery are real estate, employment and state government. The areas most likely to rise from the Great Recession are the auto industry, finance and technology.

Let’s start with the most difficult areas. Real estate will not likely recover for the next several years, according to IBISWorld, a market research company. IBIS does not expect housing prices to bottom out until the third quarter of 2010 when federal subsidies, which have artificially inflated prices, are exhausted.

During a recent visit to the Society of American Business Editors and Writers meeting in Phoenix, I checked on the real estate market there. Many buildings are vacant and I was surprised at the cheap, available housing downtown.

The same is true, I was told by business editors, in Southern California, New Orleans and in the Northeast. In fact, the only area that I’ve personally seen some sort of real housing stability is in Washington D.C., where much of the market is upheld by the enormous number of government jobs.

The only caveat to all of this, as noted by panelists at the SABEW meeting, is the billions of dollars that sit on the sidelines waiting to leap into action if there’s a sense of recovery. Too, a major reform is coming for Fannie Mae and Freddie Mac, which symbolize the broken home financing industry.

Confidence, which is an elusive word, could change the housing situation very quickly.


Likewise, unemployment will likely stay near 10 percent for the next year, according to a number of economic forecasts. That will mean that tax revenues will continue to decline, presenting difficult choices for most states.

Political leaders will have to budget more layoffs, pay freezes and reductions, cutbacks in education on all levels, and trims in virtually every imaginable area. In addition, a number of states will have to take on additional debt to work through the crisis.

On the positive side, several analysts expect the auto industry to begin a slow comeback this year and a stronger showing in 2011. Demand for smaller, electric cars will grow. Ford Motor Company is leading the American charge, and General Motors is expected to remove itself from the deathwatch. With help from Fiat, analysts say Chrysler will improve the quality of its cars. Too, Americans will soon see a number of Fiat products for sale for the first time in years.


The tech industry will continue to zoom ahead. Apple has already sold its limit of Ipads, and Google continues to go to places that nobody can imagine. The Google trader business in Africa is just one small example of the mindset of the company. The world of mobile devices will continue to grow as it becomes the leading way that most people reach the web.

So what does this portend? With the government earning $7 billion on the Citibank bailout and General Motors showing signs of life, journalists might be tempted to think that the difficulties are behind us. After all, China’s growth rate continues to zoom ahead. Why not ours?

But the damage from the Great Recession is far from complete. The government’s ability and willpower to continue propping up the economy is waning. Some analysts believe there are several signs that we’ll experience another dip.

Recently, I attended a speech by former Treasury Secretary Henry Paulson. As I listened to him explain what he did to prevent a potential depression, I thought about how many on Wall Street and Washington do not truly understand the woes of the average person on Main Street.

Those concerns have been expressed politically from Massachusetts to Arizona. More will be heard in November.


So the best advice to journalists in the months to come is to stay vigilant. The Dow may not be the best indicator of a coming recovery. Instead, watch the numbers for housing and employment. Are they truly bottoming out?

And, just importantly, pay attention to the public. They’re our best economic indicator.

Randall Smith is the Reynolds Endowed Chair in Business Journalism at the University of Missouri School of Journalism in Columbia.

In Basics, Economy, Networking.

Comments (2)

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  1. You don’t mean lagging indicators, you mean areas or sectors that are lagging. “Lagging indicator” is a technical term that describes economic time series whose performance tends to lag behind actual economic behavior at peaks, troughs, or both. Payroll employment is a concurrent indicator. The unemployment rate is a lagging indicator.

    But you are right about the basic point. Business journalists should know a lot more about business cycles. There are many typical behaviors, such as the unemployment rate staying high long after recovery has begun that are treated as remarkable new events in every cycle because of the historical ignorance of business journalists and their editors.

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