Signs of the times? Local indicators point to improving economy
JANESVILLE Rock County's economy recently closed the book on its best quarter in more than two years, a sign that two development officials said is more than encouraging.
Since 2010, The Gazette has published a quarterly dashboard of seven indicators to provide an economic snapshot over time. The data set now includes 10 quarters dating to April 2010.
The most recent covers the third quarter—July through September—of this year.
Figures indicate more people are buying and selling homes and cars. More of them are working, and more are keeping creditors at bay.
For the first time in the dashboard's history, all seven indicators are positive when compared to the same quarter of the previous year.
In fact, new vehicle registrations and the average prices of homes sold were at their highest in 10 quarters. Foreclosure filings were at their lowest.
In addition, retail sales and the number of homes sold posted their best third quarters in the history of the dashboard. For comparable quarters, bankruptcy filings and the local unemployment rate reached their lowest levels.
"It's a really good thing when these indicators consistently show movement in the same, positive direction," said James Otterstein, Rock County's economic development manager.
Otterstein and Rock County 5.0 compile their own dashboard, the Rock Ready Index, which includes quarterly data on the workforce, real estate, sales activity and project announcements.
That index shows industrial real estate vacancies are down considerably, businesses are spending money on fixed asset and human capital needs, there's an increased demand for training services, utility meter readings are stable to increasing and the local economic development pipeline is filled with higher quality, value-added projects, he said.
"Right, wrong or indifferent, these statistics are subject to personal positions or points of view," Otterstein said. "Folks that are gainfully employed or financially stable will undoubtedly have a different point of view regarding these indicators than folks that are struggling to find suitable work or to make ends meets."
John Beckord, president of Forward Janesville, said the recent numbers are encouraging, but it's difficult for many people to believe in an improving economy until they see a clear trend.
"The depth of the recession and the multiple business closures we experienced had a very strong impact on expectations," Beckord said. "Hopefully, these stronger numbers are starting to change attitudes in a positive way."
Beckord said business investment is a strong leading indicator of future consumer spending.
"The rationale is that today's sophisticated businesses often can gauge future demand before policymakers can implement changes, which often take months to kick in due to natural policy lags," he said. "I think the over $600 million in new business investment in Rock County since January 2010 is resulting in more jobs, more income and more consumption."
Interest rates, Beckord said, are not likely to get more favorable, and consumer demand remains strong.
He said, however, that several issues could upset the apple cart and cause businesses and consumers to pull back on their spending.
Those include failing economies in Europe, a dramatic slowing of the Chinese economy, the so-called fiscal cliff looming over the federal government and the markets by the end of the year, and the unknown tipping point when massive federal debt triggers higher borrowing costs for the federal government.
"Any one or a combination of the these could cause a precipitous drop in confidence," Beckord said.
Otterstein said nearly all indicators point to an improving local economy.
"Anytime that you can measure and report local economic trends moving in the same positive direction—particularly if there is either stability or consistency—it demonstrates from an aggregate economic perspective that things are improving," he said.
Otterstein said the recent numbers suggest consumer confidence is improving. To a lesser extent, so is business confidence, he said.
"When reflecting back upon those previous quarters where most of the indicators were moving in the wrong direction, one could surmise that stability and confidence were definitely absent," Otterstein said.
When people feel more confident about their employment, they're more likely to spend a higher percentage of their income on big-ticket items such as homes or cars, he said. In addition, they're more comfortable spending disposal income on things they've shied away from, such as dining out.
On the business side, Otterstein said companies that survived the Great Recession used cost-saving measurements that still are applicable.
"These lean approaches have enabled firms to not only control costs but increase profitability," he said, adding that those profits have allowed companies to acquire competitors and expand in Rock County.
Those profits, he said, take the place of bank financing to grow market share, develop new products, pay for equipment or fund new operations.