Colorado and United States stuck in economic purgatory
Economic news from close to home and around the world this week paints a picture of unrelenting uncertainty for an economy that just can’t seem to shake the shackles of recession.
The news isn’t all bad, but it is mostly so. With Europe teetering on collapse, American markets in tangles, global ministers of finance continuing to play the role of bucket brigade in the midst of a 100-year flood, and two continents worth of political leaders who are leadership-averse, it’s impossible not to be deeply worried about the state of the economy.
It’s not full-throttle recession. But the land of milk and honey this ain’t.
“Hunker down America” is a lousy political slogan, but it seems like pretty good advice because this is economic purgatory. The sweet by-and-by of real recovery, especially for those of us in Colorado, doesn’t feel as close as it did even two short months ago.
(Note: the term “economic purgatory” was coined by liberal economist Paul Krugman. He is a know-it-all jerk, but the phrase is an apt one. Even a blind economist lands the occasional nut.)
This week, government forecasters here in Colorado delivered a bit of good news: Revenue to the state’s treasury was up about $240 million over estimates of three months ago. Bureaucrats and appropriators cheered at the news of this, because they get to spend all that unanticipated money, of course. But regular people should cheer it, too, because boosted revenue projections ostensibly point to economic activity on the upswing.
But dig a little deeper and you will discover that the bulk of new tax revenue isn’t from new jobs or new broad-based, replicable economic activity in the state. Most of the revenue growth came from capital gains on stock sales, something that may or may not be repeated this quarter or next.
Further leavening would-be jubilation over expanding state-side revenue rolls was the sobering news last week that unemployment in Colorado ticked back up over the Mendoza line of 8 percent. After a sustained period when unemployment was shrinking month over month, this is the second consecutive month that unemployment moved the wrong way.
Prominent economists tried to put a happy face on the bad employment news, suggesting that the worsening unemployment numbers were merely a reflection of the fact that more people are re-entering the job market, and unemployment statistics only reflect the percentage of those who can’t find jobs while they are overtly looking for jobs. Ergo, it isn’t as bad as it might seem, they said.
But to the unemployed, this important academic distinction is small solace. And moreover, it only serves to remind us that the actual percentage of the unemployed in Colorado and the United States is actually much, much higher than 8 percent or 9 percent. In some counties, including Mesa County, the number of real unemployed persons is on the wrong side of 20 percent, according to one Department of Labor estimate this year.
Historically, Colorado has been slow to enter recession and quick to escape, when compared to other states. This has been a prime talking point for politicians and economists since the bottom fell out of the national economy in 2008. But saying it over and over again doesn’t make it so. Whether that’s true this go round remains to be seen.
News nationally has been equally glum. On Wednesday, the Federal Reserve Bank went back into its black box to doctor up some more of that feel-good monetary magic.
The Fed’s worry: The recovery is stalling.
The Fed’s objective: continue to keep downward pressure on interest rates to encourage would-be homeowners and small businesses to buy homes and grow business.
The problem: Because of inflexible regulation, banks can only approve mortgages for those with perfect credit and a pocket full of cash for a huge down payment. And small businesses aren’t having much more luck at getting their hands on all that low-interest dough.
The result: Like a tree falling in the forest with no one around, so no one notices, banks have a glut of low-interest loans that they aren’t loaning to anyone.
John Wooden once warned, “Don’t confuse activity with accomplishment.” Someone should tell Fed Chairman Ben Bernanke.
News from Greece had a heaping helping of Purgatory as well, and that’s an optimistic view. The good news is Greece didn’t elect socialist belligerents. The bad news is there still isn’t a collective will to tackle runaway government spending there. And the push for more debt-financed “stimulus” — the equivalent of prescribing a lobotomy for a migraine headache — is gaining populist steam across Europe.
The worse news is that while numerous members of the European Union are claiming that they are not Greece, the fact is, a number of bail-out-hungry economies in Europe are in nearly as bad a shape as Greece. As a result, no one, not even the smartest guy on Squawkbox, has a bloody clue where it will all end in Europe, as an entire continent hangs on the perilous edge of financial meltdown.
All of these forces point to an American economy hemmed up in Purgatory. We’re America, so at some point we’ll see those pearly gates of recovery. But all evidence suggests it won’t be as soon as so many need and every American hopes.
Josh Penry is a former minority leader of the Colorado Senate. He graduated from Grand Junction High School and Mesa State College.