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 or state, and the internal growth cycle also known as the regional economic 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.
The overall national economy tends to have a larger effect on regions and states than any other economic factor. The composition of national economic growth is the next greatest factor for a state or regions economic performance. Regions can have cycles driven in tge states own dynamic, but national impacts will almost always play a larger role thabn internal state industries.
Local business cycles can be caused by variations in regional growth. Economic fluctuations in regional growth can be simply defined by two basic answers. First the Alaska answer which states that jobs attract people. Secondly, there is the Arizona answer which states people move for quality of life and the jobs will follow. The Arizona answer is described as most common for regional growth across the United States. Changes in a regions population growth are the main factor in causing a states economy to grow or shrink.
As stated above, There are two answers that drive long-term regional growth, The Alaska answer, and the Arizona answer. Alaskas population grew when the economy was strong and growing, whereas Arizona relied on quality of life and then businesses followed. ## Economic policy State and local economic policy has little to no effect on short run growth of an economy. They might provide fiscal stimulus, but they have little effect on changing the business cycle and recession.
Usual economic policies such as tax credits for companies moving in are not effective. These credits can cost taxpayers more than the benefit provided. The key is that policy is important for long-term growth. This doesn’t mean that policy will stop recession but rather help grow the economy with little increments year after year. Good policy creates long-term growth and the business cycle helps with this matter.
Economic cycles have different impact on producers than the sellers.Businesses selling in a local area during recession will suffer whereas producers will benefit. Regional producers benefit from weak local positions and they can be hurt by local economic strength.
National indicators are just as important for regional businesses as they are for a national company. Measures for the regional economy must be measured as well. Monitoring key industries for the region is a good place to start. Personal income is a common measure of state economies but it usually has a three month time lag. For regional companies, one miust add the measures of the industries that are important to the region, as well as current employee data to their dashboard
| 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 |
Executive leading in a regional company must know if their local conditions match conditions in the nation or nearby regions. Differences between the home region and other parts of the country create threats as well as opportunities. This depends on whether the company is focusing on selling or producing in the region.
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.
A measure that shows the importance of an industry to a state or metropolitan area relative to that industrys’ importance to the national economy.
Money that is not being used elsewhere in the economy. Examples include stimulative spending.
The increase in cost of production generated by the production of more product units.
Describe the characteristics of the following events briefly.
Idaho’s population was growing rapidly in the 1970’s, but growth declined in the 80’s. construction employment fell from over 19,000 and activity fell by one-third as the population growth slowed. Total employment fell by 2 percent from construction alone. Population growth slowed the economy and the state’s overall growth began to falter.
Hawaii suffered four years of declining employment in the mid-1990’s even with the national economy growing. Japan had entered a severe recession reducing tourist spending in Hawaii.