New state economic indicator

N.C. State University extension economist Mike Walden recently unveiled a new measure of the state economy meant to tell us where the state economy will be heading in the near future. In today’s “Economic Perspective,” he details this new leading indicator.

“We are calling this the North Carolina State University index of North Carolina leading economic indicators, and it is modeled after a similar index at the national level, where we track and use individual components of the economy that we think tend to lead moves in the economy — that is, they tend to change before other things in the economy change. Therefore, they give us some ability to predict where, in this case, the North Carolina economy is going.

“In our index, we are using five components. We are using first a national leading index. We are also using new claims for unemployment compensation in North Carolina, building permits in North Carolina and manufacturing work hours and manufacturing work earnings — all in North Carolina.

“And looking at this index over the last year we see that it had gone down very rapidly from actually before the recession to about February of 2009, then it began to move up. And so that actually gave us a four or five month head start to where many of us think the recession actually ended.

“Recently the index has been moving somewhat sideways — a little bit down, but nothing to get worried about — suggesting the economy is still going to grow in the state but possibly at a slightly slower rate and therefore also not indicating a double dip recession. We are going to release this index every month.”