Only four states still had expanding economies in December, measured on a three month moving average basis. Texas (0.1%) is likely to enter recession in January leaving only Wyoming (4.0%), Louisiana (2.3%) and North Dakota (2.1%) still expanding. Each of these small states has expanding energy production, high farm prices and is largely insulated from the deep recessions in housing, finance and manufacturing industries. Louisiana still has hurricane rebuilding construction underway.

The state economic growth indexes are calculated by the Philadelphia Federal Reserve Bank from state employment and income data and are benchmarked to approximately track national GDP growth.

The states with the deepest economic declines in the last three months are in the Pacific Northwest: Washington, Oregon and Idaho plus Nevada, Michigan and South Carolina. These northwestern states are suffering from a depressed timber business, reduced trade with Asia, fewer Canadian visitors with the now depreciating Canadian dollar, declining semiconductor industry employment and widespread layoffs in their increasingly significant manufacturing sectors. All of these depressing factors will continue for at least a few more months. Already these states have begun to trim public spending and raise taxes or fees.

Click here to view the chart
Ranking States by Recent Economic Performance – Dec 2008

Many state and local government have already begun interim budget cuts in response to declining tax receipts. Most states will need to do this soon. Education construction starts have been stalled for three months through December at a depressed level compared to the prior year. Job site construction spending has been directly impacted so far only in a few states with declining economies for many months but projects are being pulled from the 2009 start schedule in many states. Some of these may be reversed late in 2009 if subsidies to civil construction are included in the planned second economic stimulus package in Washington.