What the Yankees Can Teach Us About the Economy
Last night, the Yankees season mercifully came to an end with a pathetic 3-0 loss to that perennial baseball powerhouse, the Houston Astros. At first, I thought I had wasted my time dutifully watching the Bronx Bombers finish off one of their worst stretches of baseball in my memory. But then I realized that the Yankee season is actually an apt metaphor for the state of the U.S. economy. Humor me on this one.
Yesterday, I attended the first day of the 2015 Northeast Economic Forum. After pondering the presentations, the central question that I am left with is whether happy days are here again or, when it comes to the economy, is this as good as it gets?
On paper, the Yankees are an impressive ball club. They were among the leaders in runs batted in, for example, and they had one of the best bull pens in baseball. Similarly, in some ways our economy is downright impressive; it’s growing, and at a rate much faster than our international peers. The unemployment rate is declining, and there is some indication that this economic growth is leading to moderately higher wages. Furthermore, the country is actually experiencing a longer than usual economic expansion.
In some ways, the numbers for credit unions are even better. Membership growth is sky rocketing along with demand for credit union car loans and mortgages. True we have a low interest rate environment, but the risk of a dangerous rate spike are remote to all but the most paranoid of examiners.
So, why so pessimistic, Henry? Because if you kick the tires on this economy, things aren’t quite as good as they appear. For one thing, the economic expansion hasn’t translated into markedly better prospects for many American consumers. Statistically, the economy has been expanding since 2009, but I wonder how many of your members actually believe that. Wages might be rising slightly, but this hardly begins to make up for the stagnant inflation-adjusted growth that workers have been experiencing in their wages for decades now.
The Yankee season fell apart as soon as Mark Teixeira was injured. Even if you believe that the economy is fundamentally strong, you have plenty of signs that it is fragile and could be knocked off course by a host of plausible threats. For instance, this morning the IMF is further downgrading its projection of world economic growth. China’s downturn is already having an impact and it’s hard to see how continued decline in China’s economic activity won’t translate into slower economic growth here. In addition, Congress’s political dysfunction could further harm the economy. One of the first tests of the new Speaker of the House is going to be how he can convince his fellow Republican members to raise the debt ceiling if the President is unwilling to give them a major concession. No one knows what type of impact a debt crisis might have and no one should want to find out.
Even the credit union numbers, as encouraging as they are, come with a huge caveat. Almost all the growth is coming from large credit unions. If the industry is going to save smaller credit unions, it must act now or it is going to be too late. On that happy note, have a nice day.