Small Town News

Slow turnaround predicted

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We know the state of the economy in general, and factors that got us where we are today. But why are economists, in Kentucky, specifically, predicting such a slow turnaround this fiscal year?

Most everything we need to understand the state's financial "outlook" for Fiscal Year 2010 (which ends next June 30) is found in the state Budget Office report for the fourth quarter of Fiscal Year 2009 that we've been studying in this column the past few weeks. The report gives a detailed outlook for the state General Fund and Road Fund for this fiscal year and a short-term outlook for the national and state economies. First, let's look at the national economy.

BAD IDEA A couple weeks ago I agreed with the state Budget Office, and other esteemed economists, that being overly optimistic about the economy just isn't a good idea. To put it in today's financial lingo, it isn't "smart money" to expect miracles from an economy that was on the verge of collapse less than a year ago. And the state Budget Office seems to agree with me.

Instead of a "robust" recovery, state budget officials say they expect more sideways movement in the economy until investors are confident that improvement is underway. Investors will be looking for key indicators, like a growth in exports or consumer confidence here at home, to become more confident themselves.

SPENDING Consumer spending has been up somewhat nationally in the past two months according to the respected firm Deloitte Services. That firm reported on Aug. 11 that its consumer spending index--which tries to predict future spending--rose in July on the heels of decreased unemployment claims, a relief in tax burden from the federal stimulus package, and an upshot in real wages.

Deloitte Research chief economist Carl Steidtmann said: "The uptick in the Index may give retailers and their suppliers a reason for cautious optimism going forward."

Still, the state Budget Office isn't jumping to any conclusions, at least at last report. The fourth quarter report states clearly that stimulus help aside, consumers "will remain mired in low consumer sentiment."

Employment woes seem to dictate the office's outlook for Kentucky. In the short term, the report says, Kentucky can expect a workforce loss of 5.6 percent between the fourth quarter of Fiscal Year 2007 and the third quarter of Fiscal Year 2010.

Personal income is expected to grow slightly, although wages and salary--which the report calls "a bell-weather indicator for many state tax variables"--is expected to continue to fall during the first three quarters of FY 2010.

Perhaps Kentucky's economic numbers will be rosier than our state economists expect in the coming months. That is always a possibility. The national economy, after all, appears to be turning around quite well. I'm sure you and I both will be watching carefully to see if better economic times might be just around the corner for the Commonwealth, while taking the projections of our state Budget Office into consideration.

I look forward to sharing with you again next week. And thank you for allowing me to be your representative in Frankfort.

Please share your ideas with me by e-mailing Brent.yonts@lrc.ky.gov.



Copyright 2009 The Times-Argus, Central City, Kentucky. All Rights Reserved. This content, including derivations, may not be stored or distributed in any manner, disseminated, published, broadcast, rewritten or reproduced without express, written consent from SmallTownPapers, Inc.

© 2009 The Times-Argus Central City, Kentucky. All Rights Reserved. This content, including derivations, may not be stored or distributed in any manner, disseminated, published, broadcast, rewritten or reproduced without express, written consent from DAS.

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