Uncharted Economy?

It's somewhat heartening to hear from Christina Romer, the departing chairman of the White House Council of Economic Advisers, that she believes freight rail volume numbers are a great indicator of real economic activity.

The trouble is Romer, an economist and expert in economic history, told me before her "valedictory" speech at the National Press Club this week that those freight numbers provide a great window on economic activity in the 1890s.

That was the heart of the problem with what Romer said at the forum just a couple of days before she returns to academic life at the University of California at Berkeley.

The administration was surprised, she said, at the depth and persistence of the economic downturn into 2009, and missed badly in forecasting that the stimulus package passed in early 2009 would keep the unemployment rate at around 8 percent. The unemployment rate, of course, jumped beyond 10 percent and remains at 9.5 percent, creating a strong drag on needed improvement in the housing and retail sales markets.

She did not foresee, Romer said, that businesses would not bring back workers in big numbers and doesn't entirely understand why they have not. It's been difficult to respond to the downturn, she said, because "we have been in largely uncharted territory."

You can read one assessment of Romer's comments at the NPC in the Washington Post.

But it's hard for us to really believe that the direction of the economy is really so thoroughly unknowable. The recession and spindly recovery may not have progressed as others have, but with the business press reporting numbers in unprecedented detail and industry groups, companies and government agencies spitting out a seeming constant stream of data, the existing economic landscape is being charted pretty well.

And anyone who wants to understand why businesses are behaving the way they are need only refer back to comments we cited two years ago at the onset of the financial industry meltdown. One transportation industry executive told us then, "Cash is king."

That was prescient then, and it remains true.

And anyone looking for a hint of the direction of the economy back in the spring could have seen it in The Journal of Commerce cover article June 7 by Lakshman Acuthan and Anirvan Banerji of the Economic Cycle Research Institute. They found worrying signals in the JOC-ECRI Industrial Price Index and warned, "A downturn in global industrial growth is at hand."

Rail freight volume figures also showed signs of weakness in the spring, but that traffic has been ticking upward lately. We don't know how the figures compare to the 1890s, however.

-- Contact Paul Page at ppage@joc.com.

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