Business Editor: Economy in twilight zone, says an expert

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By Arundi Venkayya Cox, Staff Writer 1:07 AM Sunday, November 8, 2009

Is the recession over?

It’s hard to tell given the mixed messages we have been hearing.

Some reports say we are climbing out of the recession while other indicators note consumer spending is down again.

“There are mixed positives and negatives. It’s called the twilight zone,” said Robert Premus, professor of economics at Wright State University. “It’s called mixed signals.”

One thing that economists will be looking for is when the National Bureau of Economic Research declares that the recovery is on its way, Premus said.

The NBER looks at multiple factors when considering the state of the economy, including the gross domestic product, unemployment and sales.

“They look at lots of things,” Premus said. “They see when the positives outweigh the negatives.”

But, Premus cautions, some of that data lags behind. For example, GDP is released quarterly and so there is a lag in data that is being analyzed.

What we want to see is output growth, Premus said. That means that we see increased production of goods and services that are consumed.

We are starting to see those signs, but they are slow. We’ve seen some good signs including one quarter of growth.

“We’re probably into a slow economic recovery,” he said. “It’s quite slow. The hope is that it will pick up steam.”

Part of the issue is that when there is uncertainty about the future, businesses don’t want to take risks, banks don’t want to make loans and people don’t want to spend. Those behaviors can hold back a recovery.

So, how will we know locally if the economy is turning around?

“We can see housing construction and existing home sales going up,” he said. “If we see other kinds of new construction or if we see our factories and businesses pulling people back to work.

“If businesses are prospering then we know that something positive is going on.”

To help move the local economy forward, Premus suggested that businesses:

• Reorganize their cost structure. Move toward being more efficient.

• Look at their strategy and see what kinds of new market areas might be more productive for them. (Look at changing product mix.

“Those are the things that you do,” he said. “Businesses should be getting ready for when the market does open up.”

Do you know about bright spots in the Dayton region? DaytonB2B wants to hear from you. Send your story ideas to avenkayyacox@coxohio.com.

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