Kentucky economy blooming this Spring [Opinion: The Arena]

Kentucky economy blooming this Spring [Opinion: The Arena]

Two economic data points updated yesterday by the Federal Reserve show that daffodils aren't the only things blooming in Kentucky. As of the fourth quarter of 2011, Kentucky per capita income finally reached pre-recession levels, and the Federal Reserve's leading index forecasts Kentucky economic activity at levels not seen in the better part of a generation.

Just as the economy tipped into recession in late 2007, Kentucky experienced an unusual spike in per capita income. That unusual spike was immediately corrected by the recession, and incomes then proceeded to spiral down until the Spring of 2010. Over the past two years, with some minor setbacks, per capital income has been working its way back up.

Real per capita personal income measures the average amount of income per Kentuckian and is adjusted for inflation and seasonal effects. It measures all income including wages, investment income, farm income, unemployment benefits, Social Security, and any transfer payments.

The only downside to the per capita income number is that it is a lagging indicator. It tells us what already happened and tells us nothing about what might happen next.

That's where the Federal Reserve's leading index comes in. This forecasts future economic activity, and this is what is really exciting. Kentucky's leading index not only forecasts stronger growth than at any time since the recession -- it predicts faster growth in the state than at any time since 1997!

The leading index looks at recent economic activity such as wages and salaries, unemployment rates, nonfarm payrolls, and manufacturing hours worked, and factors in forward looking indicators such as housing permits, new unemployment claims, supply chain delivery times, and the spread between short term and long term interest rates.

The leading index isn't a guarantee, obviously. High gas prices stemming from the saber rattling with Iran could take the bloom off of our Spring growth. That said, a leading indicator forecasting the best growth prospects we've seen in 15 years is a welcome indicator indeed.

--------------'s The Arena section features opinions from active participants in the city's politics. Their viewpoints are not those of (a website is an inanimate object and, as such, has no opinions).

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