Bloomberg Economist Richard Yamarone Addresses Lansing Economic Club

Publish Date: Friday, December 16, 2011

As you ponder your business and personal financial strategy for 2012, the idea of analyzing last quarter’s sales of women’s dresses may have not occurred to you.  However, this was one of the eye-opening economic indicators that Bloomberg Senior Economist Richard Yamarone challenged his audience to consider during his presentation to the Lansing Economic Club on December 15.  Backing his assertion with the well-reasoned argument that women tend to determine most household—and therefore, consumer—spending and that their dress purchases are uniquely dictated by themselves, Yamarone explained that these resulting “luxury” purchases tell us a lot about discretionary income in the American home.  Other indicators include the amount that Americans are spending on dining out, jewelry and watches, and casino gambling.  While being cautious to advise that “there is no holy grail of economic indicators,” Yamarone maintained that these industries take an accurate pulse of what’s happening nationally.

So what are women’s dresses telling us?  The outlook isn’t a positive one.  As the U.S. economic base continues to shift from one of manufactured goods to services, the tools that the government and Federal Reserve once had at their disposal have lost their effectiveness.  Although productivity is on the rise, unemployment has not significantly changed and the average period of unemployment is higher now than at any time in our nation’s history.  And no, women are not buying dresses.

The four components of GDP (gross domestic product)—consumer, investments, government, and trade—each warrant consideration in this discussion.  While the first three are fairly flat or in decline (substantially, in the case of government spending), trade may hold some promise, although there is little indication for much optimism. 

Yamarone said that Michigan is recovering faster than 48 of the other states (North Dakota shows higher growth), citing the growing demand for automobiles as the most important factor.  But he cautioned against the state’s large dependence on a single industry.  As for advice for the nation moving forward, Yamarone, though not advocating further governmental stimulus packages, urged decision makers to consider investments in infrastructure.  Pointing to China’s recent economic stimulus program allocations in contrast to those enacted in the U.S., Yamarone asserts that investments would create jobs today and the necessary foundation for forward-looking growth.

Jade Sims, International Trade Specialist, MSU-International Business Center