The risk of an economy-wide recession in 2008 has increased, but remains well below 50%. Reed Construction Data (RCD) believes that the economy will avoid a recession — but it will be a near miss. Nonetheless, some states are already in recession, with more on the brink.
Seven states are now in a recession: Alaska, Arkansas, Michigan, Minnesota, Missouri, Nevada and West Virginia.
Slower economic growth has put four states on the brink of a recession: Illinois, Kentucky, Pennsylvania and Vermont.
Two states, Louisiana and Rhode Island, were in recession earlier this year independent of the national economy, but have now resumed growing.
Economic growth has slowed markedly in recent months in ten states. Although each continues to expand, the risk of recession has increased significantly in these states: Arizona, Georgia, Indiana, Maryland, New Mexico, Ohio, South Dakota, Tennessee, Utah and Washington.
Only five states have experienced a significant acceleration in growth in the last few months: Alabama, Louisiana, Oklahoma, New Hampshire and Mississippi.
The Most Serious Recessions are in Michigan and Nevada
The most serious recession is in Michigan. It began in April and will persist into next year because employment, personal income and production are all declining. Michigan’s economic growth index is falling at a 4% annual pace.
Nevada’s recession is nearly as serious. It also began in April and will continue into next year. Nevada’s recession stems directly from the collapse of the housing market, while in Michigan the deep collapse of a much smaller housing market aggravated the core problem of a declining motor vehicle manufacturing industry.
The recessions in the other five states are much milder, more due a loss of income than a loss of jobs, so they will likely be less persistent.
The recent pickup on the Gulf coast is due to hurricane rebuilding, which was delayed longer than expected. Total construction starts in Alabama, Mississippi and Louisiana have increased 18.4% year to date through October compared to the same period last year. The comparable change for the country as a whole is -4.3%.
New England Continues to Lead Regional Growth Ranking
The regional ranking of latest-three-months-annualized economic growth rates is: 1) New England, +3.7%; 2) South Central, +2.5%; 3) South Atlantic, +2.3%; 4) Pacific, +1.7%; 5) Mid Atlantic, +1.6%; 6) Mountain, +0.8%; 7) Great Lakes, +0.1%; and 8) Plains, -0.4%.
New England (+3.7%) remains by far the fastest growing region in the country, primarily due to the rapidly expanding business-service industries in Boston, Hartford and the Connecticut suburbs of New York City.
Economic growth has all but stopped in the Midwest, both in the Great Lakes (+0.1%) and the Plains (-0.4%) states.
Growth in the Rocky Mountain States (+0.8%), for many years the fastest growing region, has dipped to one-third of the U.S. average (+2.5%), largely due to the collapse of its previously much overheated housing market.
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