Bad economic times in the north country are likely to get even worse

Times are not good. You probably already knew that.

Unemployment in the north country ended 2008 at 8.6 percent — the highest it has been since 1997, up from 6 percent the year before and 5.3 percent in 2006.

In Jefferson County in December, unemployment was 8.7 percent. St. Lawrence County came in at 8.8 percent, and Lewis County led the pack at 9 percent. That is the worst we have seen since the late 1990s.

If you or someone you know is part of those unemployment numbers, then you already know we are in a recession. Falling commodity prices have closed our local zinc mine, and turmoil in the auto industry has flattened the GM plant in Massena.

Local car dealers are facing the worst sales season in living memory, and tax revenues are down across the state. Milk prices are tanking, gas prices are on the way back up and the housing and construction markets are still on life support.

Could it get any worse?

Well yes, it could — and probably will.

We are in the midst of a global recession, coupled with a credit crisis. Demand for everything is down, as consumers save their remaining money and banks decline to lend.

The lack of demand for products (like GM cars) means that producers need to cut back on output (by closing the GM plant in Massena).

The workers who lose their jobs then cannot buy new houses or cars, or even milk for the family, causing the prices for those goods to drop and forcing builders, dealerships and farms to lay off even more workers, who then cannot buy galvanized (zinc-coated) parts for their boats.

Economists estimate the impact of new spending in a region by using multipliers to account for the fact that one dollar of spending can ripple through an economy and create multiple new jobs and incomes. The situation we face today is what that process looks like in reverse.

We get recession when we expect it. If we think the future will be bad, we stop spending and hoard our cash for the coming rainy day. When we stop spending, we reduce demand and trigger cutbacks in supply. Those cutbacks trigger more reduction in demand, and we get the recession we expected.

Good thing we saved that cash.

The situation ends only when everyone runs out of inventory and is forced to start spending again. That means hiring more workers, who then start spending, creating more demand, which causes more hiring ... I am sure you get the picture.

Recessions usually last about a year in the rest of the country, but average almost twice that in New York state. We will get a recovery when we expect it and start spending accordingly.

For years I have listened to friends in foreign countries complain that Americans were rapacious consumers who gobbled up the world's goods with borrowed money, forcing everyone else to live on the scraps.

Now that we have quit buying those Chinese coffee mugs and Brazilian-made shoes, industries around the world are collapsing. My friends overseas are now begging us to start rapaciously consuming again. Apparently those Japanese cars and bottles of Australian wine were all that stood between us and global economic meltdown.

The economic theory that describes all this comes from a British economist named John Maynard Keynes (pronounced "Canes") who developed the current field of macroeconomics.

Keynes suggested that governments borrow money and spend it freely during recessions to stimulate spending and create demand.

The Obama administration's economic stimulus plan is pure Keynesian economics.

It is worth noting that Keynes also said governments should reduce spending and retire debt when times are good. Our elected officials tend to become Keynesians during bad times but forget about it when times are good.

This would not surprise Keynes, who famously noted that "in the long run, we are all dead."

This means we can spend the rest of this long snowy winter sitting by the fire and planning how we should spend whatever slice of the stimulus package we can get our hands on. This seems to be a national pastime, with proposals to fund everything from theme parks to the slaughtering of dairy herds.

Nothing cheers us up during dark economic times like the prospect of a trillion dollars tossed about in a stimulating fashion.

What would be good stimuli for the north country? We should be looking for things that will add lasting value, make us more economically competitive and create near-term jobs in the region — things like:

■ New telecommunications infrastructure. Westelcom has been doing a nice job of wiring local municipalities with fiber optics lines, but we could do much more.

Access to low-cost and reliable broadband telecommunications capacity could do more to attract/launch new high-tech businesses in Northern New York than all the Empire Zone tax breaks in the state.

■ Energy-efficiency upgrades to public buildings and the development of alternative energy systems. Winters like this one are great reasons to want to save energy and reduce costs.

■ Improved tourism infrastructure, including trail systems and water recreation areas.

Our tourism industry has languished over the years as we have failed to make capital improvements and remain competitive. A revitalized tourism industry could create sustainable jobs and make the area a nicer place for residents as well as tourists.

Competition for stimulus plan money will be stiff, but we should be able to get our share.

If you have ideas for stimulus projects in the north country, I would like to hear them. No one knows what the north country needs better than those who live here, and we might all benefit from an exchange of ideas. I will dedicate a future column to the economic stimulus ideas I get from readers.

This promises to be a grim year for most of us, and 2010 probably won't be too much better, but things are much worse elsewhere.

With more than 200 inches of snow in southern Jefferson County already, and two more months of winter still to go, the fervid warnings of global warming are starting to sound like good news.

It's nice to have something to look forward to.

Greg Gardner is an associate professor of business at SUNY Potsdam. His column on business issues in the north country is published monthly in Money Matters.