Encouraging Economic Report From New York Could Hint at New Trend
Not only did manufacturing activity expand in January, but rising employment indexes were reported as well for the State of New York, according to a report released Tuesday by the New York Federal Reserve Branch.
The general business index rose from 8.5 to 13.5, while the new orders index climbed from 5.7 to 13.7. This and other index figures prompted the future general business index to increase from 45.9 to 54.9, all sizable jumps. (Note: these indexes are based on zero, and can go negative as well. A positive number indicates expansion.)
Also in January, the New York employment picture brightened considerably: 51% of survey respondents expected their workforces to expand over the next six to twelve months, with only 9% predicting the opposite. These statistics are consistent with …
the upsurge in new orders, plus further survey results of a 10-point (index) rise of unfilled orders, and a 6.6 index increase in inventories. Reasons given for expected workforce enhancement centered around ‘higher expected sales growth’, which of course implies higher consumer and producer spending, the twin catalysts of economic recovery.
The survey results were stronger in large companies than in the smaller ones. Small businesses often supply the larger with their own production, so a multiplier effect from the larger can be expected, which would heighten the overall picture. As inventories drop after a recession, producers typically first increase the hours of current employees to replenish their stocks, and when this becomes inadequate they hire new employees. 80% of respondents expected that wages they pay will rise less that 5%, but that benefits paid will rise by more than that percentage. This could mean either that employers will increase benefits for current workers, upgrading them to full time, or it could imply that they expect to hire new workers, a move which could require added benefits packages (or both).
While the survey was limited to New York, its implications reach far beyond. There is no reason to suppose the opposite, given that our national economy is ‘global’ in the sense that economic activities in each state affect those everywhere in the U.S, vastly aided by the internet. Additionally, it is not reasonable to assume that consumer confidence is limited by state borders; regional trends are paramount here, and regional will transform into national if this is indeed a real recovery.
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