AC's Thomas White studies economy
On Wednesday, February 5, Dr. Thomas White, Associate Professor and Chairman of the Economics and Global Studies Department at Assumption College, published a research project titled the “Economic Indicators Project” which predicts a 1.5 percent growth in Worcester, Mass. for the first half of 2014.
White developed the Worcester Economic Index, which “is an index of economic indicators that measures the performance of the Worcester area economy,” as defined in his report. The variables White used in the WEI were nonfarm payroll employment, household employment and the unemployment rate.
“What’s unique about this is the fact that I’m doing it for Worcester. But there have been people who have done this kind of work in other areas, both at the state and national levels,” White said. “So the techniques I used have been developed before. My new contribution is applying it to Worcester.”
White’s WEI shows that the economy is making a slow recovery since the Great Recession of 2008-2009. His data ranges from December 2012 to December 2013. The WEI increased by 0.7 percent during that period of time.
To predict the future WEI, White used leading economic indicators, which are variables that indicate changes in other variables.
“For example, since the WEI is based on local employment an increase in the amount of help wanted advertising may be an indicator that employment (and the WEI) will increase in the near future,” White writes in his report.
White used national leading economic indicators. The first one is changes in consumer expectations, which is the behavior of the consumer and how he or she is likely to spend depending on future economic expectations. The second national leading economic indicator is change in the Standard & Poor’s 500 index, which “reflects investor attitudes toward future business conditions.” The third national leading economic indicator is the interest rate spread, which “is the difference between the yield on a 10-year treasure and the federal funds rate.” Lastly, the fourth national leading indicator is the Lending Credit Index, which “is a composite of several financial sector variables that are meant to capture credit market conditions,” said White’s report.
White used those national leading indicators and combined the past growth of the WEI to forecast a growth rate after a period of six months. According to White’s data, the predicted growth is from 1.5 to 1.7 percent on an annualized basis for the first six months of 2014.
In order to see even further where the Worcester economy is heading, White used both the national and local leading indicators. The local leading indicators White used were initial unemployment claims, the amount of online help-wanted ads, the number of new business incorporations and the increase of building permits. All of these local leading indicators were concentrated on the Worcester local area.
White calculated a diffusion index to see how the local leading indicators are showing a positive direction of the economy. White indicates that a diffusion index above 50 shows a growing economy, and from his data 11 out of the 12 months show growth. In October of 2013 the diffusion index fell down to 33.3; however, it went back up to 66.7 for the last two months of the year.
White concludes that for the upcoming three to six months, the WEI is expected to grow at around 1.5 percent. He writes that the analysis of the local leading indicators also hint towards a growth in the economy.
Dr. Francis Lazarus, Provost and Vice President of Academic Affairs, suggested this kind of research.
“The Provost of the College thought it was a good idea for us to be able to offer a report like this on the local economy,” White said. “The College is very involved in the local community, this is just one more thing people at the College are doing to contribute to the community.”
White has served as Chairman of the Economics and Global Studies Department for five years, and has been teaching at the College for almost 20 years.
As a faculty member, White recognizes the importance of students taking economics classes as part of their Assumption education.
“We’re all living in the economy; we’re all part of the economy. And having an understanding of economic concepts is helpful,” White said. “It’s a systematic way of thinking. It helps with critical thinking skills, analytical skills; students learn graphical and quantitative analysis, but also need to be able to explain complicated concepts through their writing. So economics helps students develop important basic skills. What I hope happens when students get exposed to economics is they realize ‘Hey, that’s interesting, maybe I’ll take another economics class.’”
White received his bachelor’s degree in economics from Iowa State University and his master’s and Ph.D. degrees in economics from the State University of New York at Binghamton.
White’s research can be read more in depth at www1.assumption.edu/worcester-economic-indicators-project/. The Economic Indicators Project will have quarterly updates. The next report will be published early May 2014.