Getting to Know Your Dance Partner
I saw a quote on Twitter yesterday in reference to Indiana’s 5 percent jobless rate by Governor Mike Pence that caught my eye. He said: “There is no denying the momentum of our strong Hoosier economy.” I know that is not very eye-catching for most people.
Luckily, I am excited about explaining why it should be.
President Bill Clinton coined the phrase: “it’s the economy, stupid,” in reference to one of the most vital parts of his successful 1992 presidential campaign. Ironically, it is Governor Pence who is touting Indiana’s economic standing as the reason for his reelection in 2016. Technically, it is difficult to argue the strategy until guys like me start digging a little deeper.
The fact is that our state’s economy has been an obvious dance partner of the national economy since Pence took office in 2013. At least in regard to the data that is.
In January of 2013, the Indiana jobless rate was 8.4 percent, compared to the national rate of 8.0. Three years later, Indiana had dropped to 4.6 percent, and state GOP officials were celebrating. What was largely unmentioned though, was the national rate had stayed right in step, sagging to 4.9 percent itself. The most recent numbers for May show the beat goes on, with Indiana celebrating the Twitter fodder mentioned above of 5.0 percent compared to the national 4.7. All of these numbers are provided by the U.S. Department of Labor, Bureau of Labor Statistics.
The nation seems to be picking up the pace a little, making this waltz look just a little awkward.
If my point is not obvious yet, I will take a break and make it. The unemployment rate is not a useful measure this election season. If it were, President Obama and Governor Pence would be the most popular executives in the arena. And I can’t think of anyone who is a die hard supporter of both of them—at least not simultaneously.
An additional problem the facts present here is that the Indiana economy will always be a subset of the national one. In other words, local progress will almost always track the nation’s. It is not booming independently of it. Now if Hoosiers were prospering in spite of a dragging nation, that would be something.
Unemployment rates are not the only measures in play here though. The U.S. Department of Commerce’s Bureau of Economic Analysis (BEA) provides more information that shows our other dance steps are also in sync. The BEA reports two measures of Indiana ranked right in the middle of the pack of all states, and in both areas we are a little slower than the nation.
In state personal income growth, the 2015 national average was 4.4 percent, and Indiana came in at 4.0, for a national rank of 25. For gross domestic product, the BEA reports the 2015 national average at 2.4 percent growth, and Indiana came in at 1.7, again tying us for 25th among states.
Now pardon me while I join you all in a massive, collective yawn.
These numbers are far from campaign fodder. But more importantly, if a top notch spin doctor wants to turn it into that, I am dying to hear how it will separate us from the national numbers. Many will want to compare our numbers to our neighboring states, like our troubled border mate to the west. And while Illinois has unemployment numbers consistently worse than ours, 6.4 percent currently, even they had better GDP than we did in 2015 at 2.3 percent growth.
The moral of today’s story is that we need to be skeptical of politicians who take credit for market performance. Markets are bigger than presidential economic policy, and even more so than any governor’s. There are things leaders can and should do, but things affecting economic outcomes are infinite.
If the federal or any state government wants to be a positive change agent in a market, steady predictability is probably the most valuable strategy. On Indiana fiscal policy, there are no drastic changes planned by either gubernatorial candidate. But there should be an evaluation of who is more likely to commit an unforced error, and at the state level, social policy issues are synonymous with economic policy. RFRA, for example, was an unforced error and unique to our market—and it was economically significant.
Presidentially, markets are scared of only Donald Trump. Uncertainty is off the charts there.
So as the economic beat goes on, look your dance partner in the eye. There is data behind that smiling face. And the data has a fantastic way of changing the simplest of tunes.