Despite the jolt of market optimism after the Dow jumped above 9,000 for the first time since January last month, there are less hopeful economic indicators all around.
In New York City, one of the most apparent is empty storefronts. The New York Times reported that the city’s vacancy rate was 6.5% overall and more than 15% in parts of midtown Manhattan. In a citizen-journalism project, the city’s public radio station WNYC has asked its listeners to add their own indicators (more crowded campgrounds, overgrown highway signage, the height of cargo containers in Port Elizabeth).
Elsewhere, another canary: the Better Business Bureau of Chicago reported a steep increase in complaints about payday loan operators. From March 2007 through March 2008, five complaints were filed. From March 2008 to March 2009 this increased to 30 complaints filed.
In a recent column for Slate, Professor Ray Fisman questioned why people take out these kinds of loans that have an APR in the ballpark of 400 percent. Are they desperate or do they not understand the loan’s terms? He cited research that found that “borrowers who were given a chart explaining the three-month cost of carrying a payday loan were 10 percent less likely to take a loan during subsequent months. Among those who did take additional loans, the total amount borrowed averaged around $195, as compared with $235 for the control group.” In other words, financial literacy is a small factor — but for many borrowers, the need for fast cash is too great to be deterred.
What unusual economic indicators have you noticed? Please leave a comment.
At the macro level, Professor Paul Glasserman pointed us to the VIX volatility index as an economic indicator. “It is a forward-looking measure of volatility in the stock market,” he said. “High volatility is often accompanied by negative returns. From 2004 through the middle of 2007, the VIX stayed below 20%. In the fall of 2008, it jumped to over 80%. It’s been generally declining since and is currently around 24%. A drop below 20% would be a symbolically important event.”
Some good news however: economic indicators are not necessarily mood indicators. Professor Jonathan Levav directed our attention to the research of Princeton economists Daniel Kahneman and Alan B. Krueger and their research on income and happiness. In a 2006 article in Science, they wrote, “People with above-average income are relatively satisfied with their lives but are barely happier than others in moment-to-moment experience, tend to be more tense, and do not spend more time in particularly enjoyable activities.”
Photo credit: Andrew Dallos