Economic theory is based upon the mathematics of sequences and series. Think of this as an ordered set of numbers representing the economy and a series as the total transactions of an economic sector. The basis of this insight lies within the theory of convergence and divergence, which is a reflection of economic transactions occurring at given point in time.
The theory of convergence and divergence describes how these sequences and series comprise the local and the national and international economies. Convergence means an increasing magnitude in the sequence and series of economic transactions. Some examples of convergence within the Eastside are evident in The Bellevue Collection’s retail stores and restaurants, Microsoft’s creation and support of software in Redmond and Bellevue, and Costco’s $70 billion of merchandise purchased at their headquarters in Issaquah.
Divergence results when products and services represent a sequence and series that depart from the point of convergence. Divergence can be seen in the Port of Seattle, with the sailing of ships out of the port to points throughout the world. Based on the U.S. Department of Commerce data, the Port of Seattle reported over $33.4 billion of total exports in 2009.
There are five critical economic statistics to watch that reflect the complex global economy:
Manufacturing
The good news about the economy is that the Purchasing Manufacturer’s Index has been improving every quarter since its low value of 34 in December 2008. In the United States, the PMI has risen to a value of 62 this month, with a similar upward trend occurring in Europe and Asia. The reason for this growth is the manufacturing of parts and components that are made throughout the world and then assembled at another location. An example of this in Washington is the new $100 million composite plant being built for BMW in Moses Lake.
Consumer spending
Within the United States, consumer spending has improved from $335 billion in December 2008 to $365 billion today. Consumer spending in Europe has not recovered and Asia is mixed, with declines in China and growth in Japan and Korea. Consumer confidence explains most of this difference.
Exports
The U.S. total export market has increased since 2008, from $124 billion to $151 billion. Both the European and Asian markets have reflected much more variability with no clear trend in either direction. In Europe, this volatility is largely attributed to the financial crisis.
Housing
U.S. single family housing starts have displayed some improvement. In both Europe and Asia, housing starts remain about 8 percent and 4 percent of the U.S. production, respectively. Multifamily construction comprises a much larger proportion of housing in both Europe and Asia than in the United States.
Employment
Some stabilization of employment in the United States is occurring. In Europe, Germany labor market is strengthening, while both France’s and Spain’s economies continue to shed jobs. In Asia, Japan’s unemployment rate is 60 percent lower than in the United States and 70 percent lower than in Korea.
Jim Hebert is the president and founder of Hebert Research, Inc., an international real estate, land use, and statistical research firm in Bellevue.
