NO MORE BUSINESS CYCLE HERE? A strange new establishment slogan popped up in last weekend's Quiet Crisis panel in the PD: National business cycles aren't important in Cleveland any more.
David Abbott: "We still tend to focus too much on business cycles. Thinking about [the future] in terms of the recession and recovery from the recession is a dangerous thing for us to be doing, because I don't think that's really fundamentally what's going on. We're really talking about a fundamental transformation of the economy in this region. We are, in effect, sort of leading the nation in some ways in the transformation of the national economy, and we have to come to grips with that and . . .We can't be lulled by the fact that we might come back as the recession ends."
Joe Frolik's summary: "Clevelanders need to realize that the old business cycle of recession and recovery is dead; productivity and global competition mean that lots of jobs lost during this recession are never coming back."
Mark Rosentraub: "If we accomplish one thing, and this would be enormous if we accomplish it, it is that people begin to understand that it's not a business cycle. We're not in a down cycle. We're at the cusp of a change in the economy and in demography, and we need to understand that and respond to it."
WE'RE NOT IN A DOWN CYCLE? Is that what the Dean of Cleveland State's College of Urban Affairs said?
Click here for a chart of Cleveland city income tax receipts from 1993 to 2002.
Click here for a chart of quarterly job growth in the county from 1990 through 2003. And click here for a chart of Cuyahoga County sales tax revenue from 1990 through the present. (Last two links are from George Zeller's CEOGC research page.)
Looking at these charts, it's pretty obvious that something very bad started happening to the local economy in 2001, and it ain't over yet. What do you suppose that sudden event was? Did the "fundamental transformation of the economy in this region" just arrive that year? Did we trip over a cusp and fall down?
The answer, of course, is that a national recession started in March 2001, followed by the shock of 9/11 and a long "jobless recovery" that continues to this day. The U.S. economy is still more than two million jobs short of its employment level in March 2001. As with previous national downturns, Ohio and Cleveland started falling earlier, fell deeper and are taking longer to climb out. And since the whole economy still has a bad cold -- and quacks in charge of curing it -- Ohio and Cleveland are still bedridden.
(Incidentally, the same is true of Greater Seattle, which might be taken as evidence that a big tech sector, new wealth and a hot market for "creatives" don't make you cyclically immune -- if anyone was interested in evidence.)
Yes, the long decline of traditional U.S. manufacturing and the structural shift to service, financial and new-tech industries have clearly hurt greater Cleveland and made us more vulnerable to national downturns like this one. Yes, in the long run everyone in northeast Ohio has a stake in economic transformation. But Cleveland's immediate economic horrors -- our catatonic job market, our empty downtown, our record foreclosures and bankruptcies, and our disastrous local tax shortfalls -- are very directly tied to the national economy, and will improve significantly when and if the national economy starts adding jobs at a normal pace.
Abbott, Rosentraub, Nance, etc. know this perfectly well. So why claim otherwise in the newspaper? Why try to make The national business cycle doesn't matter any more the next thing that "everyone knows"?
Bad assumptions lead to bad policy. Cleveland already has too many half-truths (and a few outright falsehoods) being mouthed thoughtlessly by "informed" people. This one needs to go away, right now.
