Washington The old cliche goes that when New York City sneezes, the rest of the country catches a financial cold. New York is sneezing.
There are various statistics: unemployment figures, welfare figures, tax receipts, etc.
There are also anecdotal statistics: word of mouth, visual observances of people and places, attitudes, etc.
Either way, New York has not recovered from Sept. 11. Mayor Michael R. Bloomberg's budget is facing a financial shortfall. Business that was lost on Sept. 11 has returned, but not to pre-attack levels. Corporate ac-counting scandals, including the fall of Arthur Andersen, have had an impact. And the falling stock market has had an impact, because so much of the market apparatus is centered in the city.
Quite simply, the nation is struggling along, with the gross domestic product growing at just over 1 percent in the last quarter. New York is in a recession. Good jobs are hard to come by, and good-paying jobs are a necessity for people living in high-priced Manhattan.
Put another way, we will know that America is on the road to recovery when New York turns the corner. Certainly the city remains alive. The lights of Broadway and Times Square brightly shine. It remains a city that never sleeps. And a number of companies bravely fought the economic downturn and continued to hold their own or even resumed hiring new people.
But now that sort of activity is beginning to resemble what is known as a bear market rally in the stock market. That happens when the stock market has a temporary run-up before resuming its downward trend.
From the nation's point of view, it means that a double-dip recession is feared. Is this what New York is telling us? Was New York's revitalization temporary? Is the Big Apple about to lead us into another recession? The signs are there. The fears are there. The pundits are there. We are not.
Financial analysts point to the huge outflows of money from mutual funds and the market in general as a sign of falling investor confidence. But we are contrarians. Cash makes markets go up. Cash paves the way for investments in plants and equipment. Rather, it is an over-bought stock market that should concern us. That happened in 1929 when almost anyone with extra cash had already invested it. There was hardly any cash left. Therefore, there was nothing left to drive the markets higher.
Today, the opposite situation abounds because cash abounds. This is why interest rates continue to fall as more and more people take cash out of the market and put it into savings, creating an imbalance between high savings and decreased borrowings.
So take heart. The statistics that matter are on our side. And New York will lead the way. It will do so despite the disarray in President George Bush's economic team. Even top Republicans are pleading with him to do two things: fire Secretary of the Treasury Paul O'Neill and quit being the administration's primary economic spokesperson. In other words, as they say in medicine: first of all, do no harm. The American economic engine is ready to roll.
Prediction New York and the economy will once again surprise almost everyone with its resilience.