Wednesday, June 11, 2003

One of the nice things the Fed's Beige Book does is break down the US economy into parts. It reminds one that "the US economy" is mostly an abstraction and directs us towards the things Jane Jacobs told us back in the 1980s:
Once we remove the blinders of the mercantilist tautology and try looking at the real economic world in its own right rather than as a dependent artifact of politics, we can't avoid seeing that most nations are composed of collections of grab bags of very different economies
and those bags are filled with cities.

So forget the "US economy" -- how are the regions doing? It's a mixed bag, as we might expect. Only four of the twelve districts show much sign of life. Minneapolis is the only one with a mostly positive outlook; Dallas and Kansas City show signs of picking up, making for a 'growth corridor' of sorts right down the middle of the country. New York is also looking up, although the city has been so far down since 2001 that it's not hard to do better. Frankly, that's about all the good news out of the Beige Book. The industrial Northeast writ large (Boston, Philadelphia, Cleveland, Chicago, St. Louis) isn't doing well at all, and there's little to crow about in the Southeast (Atlanta, Richmond) or the West (San Francisco) either.

Put this information together with housing bubble data and you've really got something to chew on. The housing bubble has been most inflated (80%+ price rise over the past 5 years) in these metropolitan areas: San Francisco, San Diego, New York and Boston. These have been the most sluggish areas for economic growth in the country as well; Boston has been "soft" in every Beige Book this year, San Francisco has been consistently "sluggish", and New York has been "mixed" at best, "weakening" at worst in 2003. Minneapolis look to be the only region that has real economic production underlying its housing boom while the rest look uncomfortably bubble-like.

Now as a former Minnesotan, I'd be happy to believe that Minneapolis will be the engine to pull the US (and thus global) economy into the future. However, I have a sneaking suspicion that the Northeast and the West Coast are a lot more consequential at the end of the day.


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