ECONOMIC ANALYSIS: State’s economy humming, so why do we feel gloomy?

The days are shorter, the temperatures are colder, and the leaves are falling off the trees. For most normal people, that means it’s time to start carving pumpkins, planning for holidays, or even watching the World Series. But for economists, it means something else entirely. It is the beginning of forecasting season.

It’s a time when organizations of all kinds are thinking about what they can expect in the coming year. For most of us, the state of the economy figures prominently into that calculation. And whom better to put that question to than your friendly neighborhood economist?

So those of us who try to keep up on these things have found ourselves on podiums at luncheons and breakfasts lately, pontificating with our tables and charts on matters economic. And even though we are there to dispense what passes for wisdom, in my own experiences on the forecasting circuit, the flow of knowledge goes in the opposite direction as well. I learn something from every group of business leaders I meet.

This year’s experience is proving that point again, even if the lessons learned continue to be surprising. The biggest surprise this season has to do with the overall attitude toward the economy. In a national economy that is well into its fourth consecutive year of growth, in a state where both job growth and tax revenue are up strongly, many of us still think the economy is in bad shape.

In fact, if you were to tick off what factors are the most favorable for Indiana businesses in the coming year, first on the list would have to be the outstanding climate in the national economy. Interest rates are low, inflation is still low, and profits are quite healthy. Businesses everywhere are betting on growth, spending prodigiously on new technologies and new products.

And the news for Indiana is even better than that. The industrial economy has quietly managed a resurgence that has increased factory output nationwide almost 9 percent since the spring of 2003. No one disputes that the manufacturing economy has been profoundly affected by global competition, but we lose sight of the fact that the overall pie continues to grow.

So why the gloomy economic assessments out there? For some, I suspect, it’s what’s going on in their own businesses. It’s hard to find an employer that hasn’t been challenged by competition, energy costs or technological change in the last six months. If there were such a thing as a “comfort index,” I suspect it would be running a bit lower these days for businesses and workers alike.

And the negative spin on many economic reports hasn’t exactly helped, either. Recent headlines that suggested the 0.5-percent rise in the Consumer Price Index for the month of September signaled the beginning of a high-inflation environment bordered on the absurd, when you consider that prices for everything except energy are up only 1.9 percent from last year.

But I can’t just blame the media on this one. Some of us economists have been preaching about the big challenges facing the Indiana economy-including the brain drain, loss of corporate headquarters, and comparatively low paying jobs-for quite a few years running. Have we been doing our jobs too well?

After all, I have met intelligent people in the last several weeks who think Indiana is losing population, or that income is actually falling, neither of which is true. It’s a difficult economic environment out there, certainly, but it’s a reasonably prosperous one as well.