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 region, and the internal growth cycle.
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.
You can tell how similar or different a state is performing compared to the national economy, this is done with similarity indexes.
Differentiation in the population growth rate of a region or state can directly effect its economy and cause it to accelerate or decelerate.
The quality of life is a major takeaway when it comes to long-term regional growth. People want to live comfortably which drives many people to move to different regions, which grows the economy of that state.
Economic policy is really seen in the long-term. Many changes in the economy are not seen over night.
Producers are directly effected by the regional economy around them. If the regional economy worsens, then the producers will likely benefit, and the opposite still applies for a stronger regional economy.
Early warning signs for a regional company could include local employment rates and how well or not well companies are performing that are important to the region.
| 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. |
|
| 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 shows how important an industry or company is to its region and how it compares to the overall economy.
Work that is done in a region that is contracted by a company that is located outside of that region.
How much it costs to produce one extra product
Describe the characteristics of the following events briefly.
Both population growth and construction activity decreased, resulting in the employment rate to drop by 2%.
The national economy kept increasing, however employment rates dropped for four consecutive years. Japan had entered a recession decreasing tourist spending in Hawaii.