Vital statistics

The statistics tell a story, but is it all doom and gloom?

There are so many statistics out there indicating the way forward for the economy that many the average citizen’s head is spinning.

Here’s the one that I like best: a CBS poll showed that there are still eight percent of the population who believe that the economy is improving. My heart hopes that this silent minority are right, but my head questions their enthusiasm.

Where could these people come from? Perhaps they are eternal optimists or maybe they are pawn brokers or auctioneers who are benefitting from these troubled financial times. Maybe they are castaways who’ve just returned from a deserted island after many years exile. It would be nice to think that they are economic professors, however, who are forecasting some sunshine from this thunderous climate.

Another statistic which is factual: the US unemployment rate reached 8.1 percent at the end of February, its highest level in 25 years. This equates to 4.4 million people. News reports say that in key industries –manufacturing, financial services and retail –layoffs have accelerated so quickly in recent months as to suggest that many companies are abandoning whole areas of business.

It seems to me that 8.1 percent is a low figure considering all the doom and gloom we read each day. Estimates say that at the height of the Great Depression the unemployment rate reached 24 percent. So maybe the optimists are right and things aren’t all that bad.

However, reports say that the economy has shed at least 650,000 jobs for three straight months, the worst decline in percentage terms over that length of time since 1975. If this keeps up, the unemployment growth rate could exceed any other time since World War II. That’s a frightening thought.

Here’s another statistic, from Professor Robert J Barro, economist at Harvard University. He said during a recent television interview that there’s a 30 percent chance that the US economy will hit a downturn similar to that in the 1930s which was the lowest point of the Great Depression. That means that there’s a 70 percent chance this won’t happen. One might be forgiven for exhibiting a touch of optimism.

Apparently, most economists now believe that the economy cannot show improvements until the last few months of the year, when the Obama administration’s $787m emergency spending program begins to flow through the economy. I’d like to know how many economists that is –50 percent or 70 percent – dare we say 100 percent?

This statistic matters a lot, because it may determine whether or not these columns are still running year end.

Finally, here are some nuggets from business guru Warren Buffett, chairman of Berkshire Hathaway. He said recently that there are 7,400 banks in America and most of them are doing fine and will be able to take care of themselves during this economic struggle. He also said that the US is not Japan and will not take 20 years to come out of this slump.

He believes that things will be fine in five years, but just wished that it could be faster. If those people from the CBS poll are right, maybe it will be faster. Let’s hope.