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Stephen Dunphy / Times staff columnist
Fed takes a national perspective but regions feel impact

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That's the way the Fed has to operate — nationally. You don't have to look very far to realize great differences exist within the national economy.

For example, the Seattle area is far from its pre-recession peak, while Southern California booms. The unemployment rate was 2.6 percent in April in Portland, Maine, but 6.7 percent in Portland, Ore. And, the unemployment rate was more than 7 percent in Alaska and only 3 percent in Hawaii, both remote areas with small populations.

Puget Sound-area business and government leaders would just as soon the easy-money policies of the past four years continue. But the Fed can't do that — it now wants to gradually raise interest rates to slow inflation and keep the whole economy from growing too fast.

To understand the big picture, it might be useful to think of the U.S. as a kind of "North American common market," a group of regional economies held together by a connecting federal structure.

The National League of Cities took that approach in a study a few years ago. "The boundaries of the United States and the strength of federal powers have created a common market of local economies, a complex web of economic interdependence," the league said in a report.

The league did the study because decisions often are made at a local level, but really have regional implications. The U.S. economy has a two-tiered structure. There are a few common markets and a national market, but decisions are made at three levels — federal, state and local.

One of the theories of the 1990s was that sub-regional economies would become more important than the states themselves. Some areas tried to develop super-regions that could compete from a common cultural base. Business and political leaders in Memphis, Tenn., and parts of Arkansas and Mississippi began a quest a few years ago to create a regional hub, trying to erase old habits and map lines.

But the success of a super-region, say experts, depends on how far people are willing to commute and how big the media market is. Critics stress that a super-region is born naturally as opposed to being developed through blueprints and commissions.

There are many successful super-region examples. The Raleigh-Durham, N.C., area is the "research triangle," built of universities in the area. The Baltimore-Washington axis is a city-government-built region. The New York City tri-state area reflects the power of one of the largest cities in the country. The Puget Sound area also falls into this category with a national reputation as a hotbed of entrepreneurs and technology.

The sub-regional economy idea might work well in terms of formulating policy — the Seattle area is the most trade-dependent area in the country, so it ought to be the most trade-friendly area in the country. That kind of thing.
 
The common market

Here is one way to break the common market down.

Cascadia: That's us, and we still suffer with high unemployment rates compared with the rest of the nation. Job growth has a long way to go before regaining all the jobs lost in the recession.

California: An economy all its own, the sixth largest in the world, if it were a country. Overall, it is strong and growing, despite some problem pockets. Even the hard-hit Silicon Valley in the north shows signs of life.

Mex-America: A broad swath across the Southwest, including Texas. The economy here is good, with a combination of land, young immigrants, retirees and money boosting the economy.

Montania: The mountainous West where the population is thin and the economy is small but growing. Some pockets of strength like Las Vegas, but overall, slow and steady is the word here.

Great Plains: The largest, this vast area stretches across the middle of the country, including big agricultural states like Kansas. It is the crossroads economy of the U.S., epitomized by Chicago, a huge flat expanse of people and business. Pockets of weakness here, especially in places such as Ohio, where small manufacturing has been hit hard.

Dixie: The South overall is doing very well, with most areas posting good results. Florida is a stronghold of leisure industries and retirees. Atlanta in April had an unemployment rate of only 3.6 percent.

The Colonies: In the Northeast, where the birth of the nation occurred, things are looking up. Boston's unemployment rate was 4 percent in April. New York City's was among the highest at 6.7 percent, but several areas adjacent to the city were much lower — the Nassau-Suffolk area, for example, was at 4 percent.

The Outposts: Alaska and Hawaii, two remote states not tied to the 48 contiguous states. They tend to have economies all their own — Alaska with oil and government, Hawaii with tourism and the Pacific Rim. Both do fairly well these days.

What does all this tell us?

Add it all up and there is such a thing as the national economy. Gross domestic product, the total of all the goods and services produced in my common markets, is almost $10 trillion, very much the national economy.

The Fed must act on a national level. There can't be a Cascadia federal-funds rate at one level and a Mex-America rate that's different.

But it also says that the pain and gain are not experienced equally. Our little piece of the common market is still among the last to share in the overall prosperity.

Stephen H. Dunphy's phone: 206-464-2365. Fax: 206-382-8879. E-mail: sdunphy@seattletimes.com. More columns at www.seattletimes.com/columnists