States set the stakes.

• Position: Influence of national economy on local economies - Interview

With this issue, Gary Shoesmith, associate professor at the Babcock School of Management and director of the Center for Economic and Banking Studies at Wake Forest University, adds the Triangle, Triad and Mecklenburg County to his quarterly forecast of economic trends.

BNC: How much does the national economy influence local and state conditions?

Shoesmith: Research here at the Center for Economic and Banking Studies has shown very clearly that state and local economies are much more autonomous than many people may have thought, which simply means that regional economic performance and prosperity are more dependent on the managing of those economies than they are on the U.S. economy.

For example, you would guess that Illinois and Indiana or Michigan and Ohio would be following similar economic paths, but they are not. Tests indicate that nearly all states have independent long-term trends. Positive changes in the U.S. economy can be expected to lead to positive changes in state economies, but those TABULAR DATA OMITTED changes are not the same for individual states over time, or for all states at the same time.

BNC: What are the implications for North Carolina?

Shoesmith: These types of results can be very encouraging in that they suggest we are the authors of our own fate. We can take steps in recruiting companies, like Mercedes-Benz, and by expending the energy and resources to build our economy we can move forward somewhat independent of the U.S. economy. At the same time, it means that if other states competing for those same industries outhustle us, then we will not necessarily be able to rely on overall U.S. economic growth to lead our economy.

BNC: Is the national economy picking up steam?

Shoesmith: Based on what has been happening the last two quarters with inventories, productivity and overtime, the U.S. economy is poised for much stronger growth. Companies are using more overtime hours to meet their production goals, and of course that stretches the existing work force. Once they've squeezed as much production out of their current labor force as they can, then they'll have to hire additional workers. By the same token, companies have managed to drive down their inventory levels to record lows over the past six to nine months, which also suggests that as demand and production increase in...