How to look at the Economy

April fool’s day is an appropriate time to listen to the news stories about the economy – none of them can be serious!  The world economy and the U.S. in particular increases each day in complexity, yet the media in particular try to focus their short form lens on a handful of phenomena.  Don’t.

A bundle of measures, not bundled but listed with relative and time series comparisons (stay awake) is the best direction to look.  A survey of surveys is better, but more time consuming; and for those of you who are students young and old, the public databases (think FRED) are perfect to answer your questions. About the Economy writ large (the big picture) or small (how does it affect me).

The answer, across almost every dimension, is that American large and medium companies are in good and getting better shape. They are growing, and producing innovation and profits while investing in the future.  The managers and employees at these companies are probably doing nicely.  But there are, IMHOP, four sectors in the economic world – Government Consumers, and Institutions all of which present a mixed picture.  In short, there are huge recent structural changes that in the U.S. show spotty adaptation and leadership.  The government is easy, since most agree that even the best are slow to adapt to new technology and new challenges. So any success in the other sectors is subject to government performance.  At worst government is slow to embrace new tools and techniques; at worst they are enumerate providers of poor quality services.

For consumers you will see the split between informed and uninformed, which has little to do with income of region. The family structure is changing dramatically (only 47 % of households have a married couple) and the consumption expenditures for all are becoming more and more of a business decision.  Impulse purchases and kneejerk reaction to marketing and advertising should be replaced by sober well considered decision about what to buy and when.  For many there is excellent planning and seemingly for an equal number there is not. Do we need a government agency to protect consumers from stupidity? Tempted to say no, I note the student loan issue, where the system has a twentysomething making $10000 loan choice without any thought. So the big picture is muddied, but you scenario as a consumer is really based on information – those who avoid doing stupid things seem in good shape.

The sector of the economy that is problematic is our institutions (some of which are government funded). They play a greater role than ever before, and they are visibly problematic more than in the past.  Institutions are supposed to fill in the gaps between companies and governments and individuals.  They should be forward looking and marshal resources for the long term benefit of all. My observation is that many are wonderful examples of what we want our institutions to be – proactive, productive, and transparent.  There are, however, a large number of archaic backward looking institutions that often appear to be focused on their own survival and not their mission.  You know who they are.

So how is the economy?  It depends. You should consider being an active economic participant.  If your company, your government (local), your institutions, and your household have their act together you are in great shape.  If any of these elements faces challenges (most of us) you should step up to meet them, otherwise your economy is at risk.