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Posted on October 22, 2010
With so many indicators and predictions related to the status of our nation’s economic recovery, many find it difficult to determine exactly where things stand in Leon County.
For example, what does a one percent increase in U.S. manufacturing production, coupled with a five percent increase in exports, really mean to our local restaurant owners?
To aid citizens in tracking and evaluating the status of the economic recovery in Leon County, Tallahassee Reports created the Economic Recovery (ER) Index.
The Development of the ER Index
The ER Index reflects the monthly sum of the Leon County unemployment rate and the months’ supply of unsold homes.
The monthly unemployment rate indicates the percentage of people without jobs. Past experience indicates that an acceptable unemployment rate for Tallahassee is three percent.
The months’ supply of unsold homes, released each month by the real estate industry, measures how quickly homes are selling and gives an indication of economic activity in the real estate market. Any number above six indicates an unbalanced and struggling housing market.
As a baseline comparison, the ER Index adds the acceptable unemployment rate of three (3) percent to the “normal” six (6) months’ supply of unsold homes for a total of nine (9). Therefore, nine is the magic number. The closer the ER index gets to nine, the closer we are to a full recovery.
For example, the ER index for August 2010 was 21.3. This is the sum of the August 2010 Leon County unemployment rate of 8.7, and the 12.6 months supply of homes calculated for August. Comparing the August ER index of 21.3 to what is considered normal (9), it becomes clear the index reflects the economic distress we are currently experiencing.
Charting the index over time yields a more comprehensive view of our situation. The chart below shows the ER Index for each month since June 2008. As you can see, the index climbed until June 2009 and then began to decrease. You may recall that economic experts declared the end of the recession in June 2009, and the ER Index reflects that finding. The erratic behavior of the ER Index beginning in December 2009 seems to confirm the level of uncertainty recognized by many of us over the last eight months.
Tallahassee Reports will publish the ER Index each month along with an analysis of what the index means for the local economy.