A business manager, to assess the risk of a regional recession, needs to monitor the national economic cycle, the national cycle of the most important industries in the state or region they are used interchangabely in this chapter, and the internal growth cycle or the regional economic growth cycle of the state. 3 This is often associated with construction swings.
Although a regional economic cycle is not perfectly synchronized with its national counterpart, it tends to move up and down with the national economy. In addition to the broader national economy, two other factors influence a regional economy: the national cycle of its most important industries and its internal growth cycle associated with construction swings.
There are two different perspectives to consider in analyzing a regional economy: when a company sells into a distinct local market and when a company primarily produces in a local market and sells into a national or global market.
If you compare a regional industry to the national economy it helps a business to understand how good that area does related to the economy. States which match the national economy will have economic cycles which reflect the economy. States which are lower in their relationship to the national economy show cycles which are not similar when compared to the known pattern nationally. The ability of a manager to understand how to use a location quotient will help managers navigate through a state to see the industry(s) that show signifigance
The Population growth rate plays a huge role in internal regional cycles. Especially when population increases, services for example construction, heating, and landscaping also increase. With this the economy will gradually increase in that region.
States which have rapid population growth tend to have a secure growth pattern and this subsequently creates increased revenue flowing into that state. States with similar patterns to the national economy show positive impacts in their region in relationship with the importance of their industries. Additionally when people want to work they are going to a region they enjoy and thus work there. If more people enjoy this region it is extremely likely more people are going to live and try to work there.
An economic policy can have an impact to regional cycles but does not show a significant impact on the national cycle.
Growth that is happening within a business happens with less regulations on the ways that business operates and conducts its duty, Having a well developed tax system in a region can help make start up costs bearable without the burden of the state taxing everything.
Companies are fighting each other for profit within region to region. if an industry is the only one in a region, itβs able to thrive and change their prices in the event of a recession unfortunately occurring. When the local economy thrives producers can undergo some costs such as labor and the price of products.
Being aware of local economic statistics in an industry is very important to be successful in that area. Reviewing the unemployment rate can help navigate how high the need for you employees is this does not however have a major impact on the economy. How much a state makes is an important statistic for you to monitor in order for you to navigate where the best place to have a business would be.
| indicators | |
|---|---|
| national economy | |
| national cycles of the industry | national automobile sales for car dealers |
| local economy |
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| population and migration | housing permits, drivers licenses |
| consumer spending | state sales tax: drill down to exclude construction materials |
Dealing with a regional downturn
| the local economy is similar to the national economy | the local economy is different from the national economy | |
|---|---|---|
| a company selling into the local market | Follow the pattern described in chapter 7 with no additional local considerations. |
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| a company only producing in the local market | Follow the pattern described in chapter 7 with no additional local considerations. |
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Explan each of the following terms in your own words. The author explains the terms in the textbook. If necessary, you may also Google the term on the Web. Good resources include:
Explain the terms in your own words briefly.
location Quotient evaluates an industry in a region and finds out how significant that industry is relative to the national economy.
Decrease in profit from the economy resulting in the decrese of the income globally.
When a product has produced more than expected it can cause to fluctuate it fluctuates either positively or negatively.
Describe the characteristics of the following events briefly.
idaho had a drastic increase in growth rate. Homes were needed and consumers were spending money. When Idaho had a decreased growth rate the unemploymnt rates dropped especially in construction since the need for homes was not as high as it previously was before 1986.
Hawaii was showing a positive outlook in their economy but was suffering from high unemployment. This issue happened due to the recession which was happening in Japan which led to a decline in tourist consumption of goods from the state.