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The numbers that count

Study up on these six economic indicators to get a better sense of how you might fare under either presidential contender.

By ROBERT TRIGAUX
Published August 15, 2004

Come Election Day, St. Petersburg's Raul Da Silva knows exactly which of the dozens of economic indicators will most influence his vote.

Slowing GDP? Raging federal deficit? Reviving retail sales? Nope.

The unemployment rate.

"If unemployment rates are going down and businesses are hiring, it tells me the economy is firing up," says Da Silva, a manager at Lutheran Services Florida who helps refugees find jobs with area businesses.

After many slow months, Da Silva finds businesses knocking on his office door in search of entry-level workers. "They are chasing us and, before, we were chasing them," he says.

Few folks pay close, if any, attention to the dozens of formal and often technical indicators that financial experts use to gauge the health of the economy. But every voter has a personal list of economic gut checks when heading to the polls. As in Da Silva's case, personal measures of the economy's ups and downs are just part of what goes into a voter's decision. But they are an important part.

"The economy is a good indicator of how people are doing," Da Silva says. "If there was no other factor to consider, such as the war, the economy would be my No. 1 indicator."

Trying to get a good handle on the current economy is especially challenging. Some economic indicators suggest the country is powering up after a recession. Other factors hint of another slowdown.

With the 2004 presidential race between President Bush and John Kerry so close, what's a voter to do?

Here's a starting point. Six indicators stand out that, combined, help to give a decent snapshot of the U.S. economy and - more to the point - a sense of how you are doing.

The good news is, these are basic, in-your-face indicators that don't require a doctorate to interpret. Pay attention to them and, come November, you might vote with a decent grasp of economic trends and a better sense of how you might fare under the next administration.

The top six are:

1. Consumer confidence. A couple of monthly national surveys ask people if they feel confident about the economy and their personal financial situation. That's useful information. But one survey, conducted by a business organization called the Conference Board, goes further and asks people each month two key questions about job availability.

Are jobs plentiful? In January, only 12 percent of those asked said yes. In July, 19.8 percent said yes. That's still a very modest number, but it is climbing.

Are jobs hard to get? While 32 percent of respondents in January answered yes, 26 percent in July agreed that jobs were still tough to get. That's a more modest swing of opinions.

Bottom line? People are more optimistic about jobs but are not quite as confident about actually getting one. Earlier this month, the government reported a paltry gain of just 32,000 jobs nationwide in July, far below the expected 240,000.

Advantage: Bush - if the economy does not sputter and continues creating new jobs in the months ahead.

2. Interest rates. One way or the other, everybody watches the rates. After all, they are really the price of money. Thanks to Alan Greenspan and his pals at the Federal Reserve, interest rates dropped like a rock for years, making for the cheapest mortgage and lending rates in decades. But now the Fed is raising short-term rates, as it did last week, the second time this summer. And it's hinting that more rate hikes are coming in the months ahead.

For now, rising rates are not a big deal. The rate for 30-year fixed mortgages, for example, has climbed 6.6 percent from a remarkably low 5.42 percent to a still remarkably low 5.78 percent. Remember, when Bush entered the White House in 2001, mortgage rates stood at 7.17 percent.

Advantage: Bush. Still-low rates will not rise fast enough before the November elections to worry voters. If rates continue to rise, U.S. consumers will be in big trouble because of their record levels of consumer debt and their growing reliance on adjustable rate mortgages that will increase their monthly mortgage payments. When that happens, watch out for more personal bankruptcies and home foreclosures.

3. Stock market. It's the ultimate daily barometer of economic vitality. You watch it closely if you are an active investor. You fret if you have 401(k) retirement holdings in it. Even if you don't own stocks, you at least notice your neighbor's highs and lows when the market soars and sinks.

Since January, the Dow Jones Industrial Average is down 5 percent, the S&P 500 index is off 3 percent and the tech-heavy Nasdaq is down 12 percent. That's not exactly a prescription for an economic rebound. Look further back to early 2001, when the Bush administration took office, and the double-digit declines in all three market measures are far more striking.

Bottom line: A recession and the Sept. 11, 2001, terrorist attacks hammered the markets. Business chief executives now want to believe that the economy is on the upswing, but they are not quite ready to re-invest their hoarded corporate cash in new plants and expansion.

Advantage: Kerry - if he can convince U.S. companies and Wall Street that his economic policies will not drive up the cost of business.

4. Gas prices. They rose so high so fast that the consumer obsession with fuel-guzzling SUVs has faded a bit. The average price of regular gas is up a whopping 25 percent since January to $1.86 a gallon. And there's little evidence this will change soon.

Worse, global demand for oil is surging. Supplies are tight. As an oil provider, Iraq is still a mess and the Middle East has the jitters. Oil prices have hit record highs, which could translate to yet another round of hikes in gas prices.

Advantage: Kerry - if he can stabilize the Middle East with the help of other countries. Conservation-minded Kerry also backs the development of alternative fuels and tougher mileage standards for vehicles.

5. Unemployment rate. The good news is that the nation's unemployment rate stands at 5.5 percent, down a bit from 5.6 percent in January. The bad news is that's still 30 percent higher than the 4.2 percent rate when Bush took office in 2001.

Still, today's unemployment rate masks some nasty problems. People who have lost their jobs in recent years have found it takes much longer to find another position. Often, the new job pays less than the old one, raising long-term concerns that this country brags too often about job quantity and downplays declining job quality.

Advantage: Bush - barely - if he can keep the momentum of new job creation in the country. If the United States loses more jobs than it creates during the next three months, the advantage could swing to Kerry. Either way, the Democratic candidate will be able to tag Bush as the only president since the Great Depression to have a net loss of U.S. jobs while in office.

6. Hourly earnings: The American worker earned an average of $15.70 per hour in July, or about 1.4 percent more than the hourly pay in January. Since Bush took office in 2001, hourly pay has climbed a modest 10 percent.

That's good, given the accompanying drop in interest rates that made borrowing cheaper.

That's bad, given the impact of inflation, the sharp price increases in health coverage, property insurance, housing and (if you were a home buyer) real estate taxes in the past four years.

The effect is a decline in buying power. And it's why Kerry has embraced the notion of a "middle class squeeze" in his campaign.

Advantage: Nobody. Bush is alienating lower- and middle-income voters with tax cuts perceived as favoring the wealthy. And he lacks a substantive plan to control medical costs that sap wage-dependent families. Kerry's proposals to discourage the outsourcing of U.S. jobs overseas, expand medical coverage to more Americans and create 10-million new jobs sound good but remain too sketchy to generate much support. And who says the Republican-controlled Congress will go along?

So there they are. Six economic indicators that will most influence voters this fall.

Just to be sure, I asked some area experts which indicators they thought would affect voters. University of South Florida's Ron Hill, dean of the business school in St. Petersburg, chose the unemployment rate because people have an "I could be next" philosophy. He also picked interest rates because so much of America is debt-ridden.

Eckerd College economics professor Linda Lucas agreed. She also pointed to the rising significance of stock market indicators, such as the Dow.

"It is the voice of business to many, and when it is down, as it has been this summer, people draw the conclusion that business is not hopeful about the future," she said.

Some folks pick their own economic hot button.

Barbara Inman, development director of Pinellas Habitat for Humanity, watches government tax cuts to see if the rich are getting more than their fair share.

"I try to be as educated as I can on the presidential candidates, but I don't pretend to know all the answers," she said.

Wise words. Before entering the voting booth, get your own indicators in order.

- Robert Trigaux can be reached at trigaux@sptimes.com or 727 893-8405.

[Last modified August 14, 2004, 00:55:21]


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