I often refer to St. Cloud as the biggest small town in America.  Everyone knows everyone; I've been on the faculty of the local university for 24 years and been active in public speaking for about the last five.  So it was only natural that when the local economy began to go a little wobbly last winter that I would get calls asking about whether or not we're in a recession.  Long-time readers of this blog know I was reluctant to use that word last winter and spring, but over the summer and into fall I thought all the signs were there except one -- we still hadn't had the drop in employment that we would expect.  True, employment growth was anemic, but you'd expect a recession to be marked by a decline.  If you said we were in recession and someone said, "But Professor, isn't local area employment still up?", I'd have no real reply.  (We would of course have to have the discussion of seasonality of local employment statistics, but even based on that correction you wouldn't have seen it.)  By September, however, we started to get the decline we expected, and last month I said "we are most likely in recession now, but that it did not start until sometime in summer. July, if I have to pin a month. The more severe recessions, like this one probably will be, last about five quarters, putting the end sometime in the fourth quarter of 2009." 

A couple of weeks ago I repeated that line to a local Rotary Club as a breakfast speaker, and word spread.  The local paper's business editor called to ask about it, and I told her I was speaking again yesterday (managed to squeeze this in between fits of laryngitis and dizziness from my early winter cold.)  She and her managing editor came to hear the talk, and the report made it to the front page of this morning's paper.  My phone is ringing now with all other kinds of reporters.  (I understand comments to this effect that I made on WJON last week showed up in a public radio report, but I never heard it, only people saying they heard me -- I haven't spoken to a reporter from MPR or any other public radio station for several months.)

The reaction to my public comments confirms to me what I had felt about using "the R-word" all along:  that there is good reason to be cautious.  Writing for the local area as "the town economist" -- which is weird because there are plenty of others, not least of which is my QBR co-author Rich MacDonald, who's been doing this longer than me -- is only worth my time if in fact people are using this information for their planning at home and at work.  The managing editor, I was told, went back to the Times' office and in a meeting repeated my remarks.  And when he does, it changes how people behave.  Markets are subject to mood swings, after all.  Whether I like it or not, in a smaller market like St. Cloud, what I say about the local economy matters because people respond to the pronouncement.  Never more so, in fact, than in a period of such great uncertainty.  Such an effect is an honor, but humbling and not just a little bit fearful.  (When the RSS feed from the Times listed the entry as "Banaian:  Numbers say area in severe recession"*, I admit to a lump in my throat.  I was truly scared that would be the headline this morning in the print edition.)

I would think most people could have realized we were in a recession now without waiting for someone official to say it.  I suspect for most -- and this is true based on the people who've spoken to me in the last few weeks -- I am only confirming of what they believe to be true.  But that confirmation influences behavior by reducing uncertainty, which can influence planning for investment and hiring.  Which makes my public speaking more cautious.

*--Small correction to that header:  The 'severe' part isn't a numbers thing really; that's more my informed guess.  I think I said that yesterday, but the RSS headline writer obviously wasn't there.

Labels: economics, Minnesota, St. Cloud