While only five states have an expanding economy over the last three months, eighteen states recorded an increase in their economic activity index. Except for Oregon and Montana, all of the states with economic pickups in October were in New England, the Midwest and mid-South regions, says Reed Construction Data chief economist Jim Haughey.
While only five states have an expanding economy over the last three months, eighteen states recorded an increase in their economic activity index. Except for Oregon and Montana, all of the states with economic pickups in October were in New England, the Midwest and mid-South regions. This includes Michigan, Ohio and Indiana in the Midwest motor vehicle region and four of the six New England states. Montana had the largest month to month gain at 1.7% followed by Massachusetts at 1.5%.
The recession deepened considerably in Wyoming (1.3% month to month decline) due to energy price drops and energy development cutbacks. There was also a nearly 1% month to month decline in both Delaware and Illinois.
Among larger states, October brought a marginal decline in California and Florida and somewhat larger declines in New York and Texas. New England was the only region to show an overall month to month improvement in October driven by technology, investment management and healthcare hiring.
The growth rates are the state economic growth indexes calculated by the Philadelphia Federal Reserve Bank from state employment and income data which are benchmarked to approximately track national GDP growth.
|State Economic Activity Index
Ann. % change – last 3 months
Michigan, Nevada and Oregon are suffering the deepest recessions. Economic activity in Michigan is 30% below the previous peak level. Michigan has long been the most cyclically volatile states with its heavy dependence on motor vehicle manufacturing. The decline from the previous peak is 23% in Nevada and 22% in Oregon. Like Michigan, both depend heavily on a very volatile industry — gambling in Nevada and forest products in Oregon.
The mildest recessions are in the Dakotas. The economic activity index has dropped only 0.3% in North Dakota and 2.0% in South Dakota. However both states experienced marginal declines in October as farm prices continued to slip lower. Other states with very modest recessions include Virginia with only a 2.4% decline due to recent federal hiring and Louisiana where Katrina rebuilding has limited the decline to 2.9%.
The strongest economy continues to be in the Plains states, followed closely by the South Atlantic and New England regions. The Plains states were hit hard by the manufacturing recession which is now ending quickly but avoided most the impact from the housing and mortgage industry recessions. They also enjoyed the strongest farm income in many decades in 2008.
The most significant change in trend in the last few months has been the decline of economic growth in the Rocky Mountain and Mid Atlantic regions. Economic growth in both regions declined at about a 4.5% annual pace in the last three months. And the cumulative decline in both regions since the late 2007 peak is about the same as in the very troubled Great Lakes region.
Among the four states that set off the recession with half of the subprime mortgage defaults in the entire country, recent economic growth has been near the national average in Florida, Arizona and California but the Nevada economy declined at a 10% annual pace in the last three months. Each of these states received a relatively large boost from the various federal subsidies to the housing market in the last few months. This boost will persist through the winter with the extension of the homebuyer tax credit. But none of these states has a strong enough economy or housing market to survive the possible abrupt end to federal housing subsidies next spring without at least a temporary economic growth setback.
Click here to view the chart
Ranking States by Recent Economic Performance – October 2009