The economic growth rates in each region are the annualized growth rates for the three months ending in August in the Economic Activity Indexes calculated by the Federal Reserve Board of Philadelphia. The index is calculated from state job and income data and is scaled to approximately match Gross Domestic Product (GDP) growth for the entire US.

New England, -3.6% (CT, RI, MA, VT, NH, ME)
New England economic activity declined at a 3.6% annual pace in the three months ended in August. This region has been at or near the top of the list for more than three years. New England has relatively small shares of the most troubled industries: construction, durables manufacturing and mortgage and securities finance. The relatively large finance industry in New England is primarily mutual funds and insurance which have been more stable. New England has a relatively large share of the two most stable industries, healthcare and education. The region also has a relatively large share of the few industries that continued to expand during the recession. This includes biotechnology and some segments of business and technical software and management consulting. The -4.0% Massachusetts growth rate is one of the highest among large states in the country. The deep economic plunge in Rhode Island (-4.4%) is now over. Tiny Vermont (+0.6%) is one of only three states that expanded min the last three months.

South Atlantic, -3.9% (Fl, GA, SC, NC, VA, WV, MD, DE)
Economic growth in the South Atlantic region was -3.9% in the three months ended in August. This region has moved up the list in recent months largely due to manufacturing and housing gains in the Carolinas and Florida. Both of these industries turned from recession to expansion late in the spring. West Virginia (-19.0%) is being savaged by its weak coal industry and its older manufacturing plants. Only Michigan has a worst performance. Alabama (-7.5%) and Georgia (-6.0%) are worst than the national average. Motor vehicles, energy and older manufacturing are the problem in Alabama. Georgia’s housing market is lagging the national recovery because of a still huge surplus of homes for sale. Florida (-4.0%) has improved relative to the national economy in recent months, probably because the recession began early with the sub-prime mortgage problem and the exodus of immigrant workers. The state of the Florida economy remains very troubled even though the economy is no longer in a freefall.

South Central, -4.0% (TX, LA, AR, OK, TN, KY, MS)
Economic growth in the South Central region declined at a 4.0% annual rate in the three months ended in August. This had been the fastest growing region in the country earlier this year before the decline in energy demand and energy prices. The Texas economy is declining at a 4.6% annual pace and Oklahoma at 5.4%. Both of these oil states began to decline quickly in the spring after a strong energy market held off the recession for many months after most states were in recession. The expected slow and delayed recovery in the energy market will keep both states and possibly Louisiana at best near the middle of the list well into 2011 in spite of relatively large net immigration. Mississippi (0.2%) is still getting a boost from Katrina rebuilding and largely escaped the manufacturing and housing problems that impacted many states.

Plains, -4.4% (IA, KS, MN, MO, NE, ND, SD)
Economic activity in the Plains states declined at a 4.4% pace in the three months ended in August. This puts this region near the national average when it has been for several years. North Dakota (+3.5%) is now the fastest growing state. Credit this to a strong farm market, natural gas expansion, large state budget reserves and negligible exposure to the weak, construction, manufacturing and finance markets. Similarly, South Dakota (-0.1%) and Nebraska (-1.3%) are among the ten states with the strongest regional economies.

Pacific, -5.2% (CA, OR, WA, AK, HI)
Economic activity in the Pacific states declined at a 5.2% annual pace in the three months ended in August. This region has fared worse than the rest of the country for several years. The housing collapse had a relatively large impact here but is no longer contributing to negative growth. The Pacific region has a relatively large share of the still depressed forest products and aircraft industries. But this is partially offset by the region’s large share of the now recovering electronics industry. Both Oregon (-10.7%) and Washington (-8.4%) have very deep recessions and will be recovering months later than most states. In recent months the weakening energy industry has turned Alaska (-2.3%) from a growth to a declining state. California (-3.9%) is near the national average with its mix and troubled and strong industries. However, the still unresolved budget deficit problem in California will keep economic recovery sluggish for several years because of the necessary public budget cuts or tax increases.

Mid-Atlantic, -6.6% (NY, PA, NJ)
Economic activity in the Mid-Atlantic region declined at a 6.6% annual pace in the three months ended in August. Pennsylvania (-9.4%) is experiencing the deepest recession among large states other than Michigan. Although natural gas development is expanding, sharply reduced demand and prices for coal and other energy products is a major sourced of the state’s economic problem. Weak manufacturing also contributes. The decline in manufacturing production from October 2008 to spring 2009 was the deepest in over fifty years. New York (-6.6%) has been impacted by the same manufacturing problems that Pennsylvania experienced. But it was the decline in its dominant financial industry that pushed the state from near the top of the list to the middle in the first eight months of 2009. Finance industry job losses underestimate the weakening of the industry. The loss of bonuses, other contingent income and capital gains in the finance industry were much more serious, especially in New York City. This sharply cut local tax receipts forcing public spending cutbacks. New Jersey (-3.1%) has moved up the list in recent months. It does not have the large share of heavy durables manufacturing of finance in the rest of the region. But it does have a large relatively stable petrochemical industry and a relatively large share in the now improving electronics technology industries.

Rocky Mountains, -7.7% (AZ, CO, ID, MT, NV, NM, WY)
Economic growth in the Rocky Mountain region has declined at a 7.7% pace in the three months ended in August. This had been the fastest growing region for several years in the middle of the decade. This strong growth was fueled by high net in-migration, both domestic and foreign, and the attraction of business from higher cost states. Both of these factors are now temporarily negative but will return in a few years. Nevada (-17.8%) has a very deep recession similar to West Virginia and Michigan. Gambling is extremely income sensitive. Barely positive income growth for several years is the reason for a 20% plus drop in gambling and hospitality industry sales which has forced substantial layoffs. Arizona and Nevada and possibly Colorado have all experienced an exodus of immigrant workers in the last two years. This leaves a large space surplus which will delay the construction recovery. Wyoming (-9.4%) has plunged from near the top of the list to the near the bottom since the beginning of the year because of volume and price declines in its energy industry.

Great Lakes, -7,9% (OH, IN, IL, MI, WI)
The economic activity index in the Great Lakes region declined at a 7.9% annual pace in the three months ending in August. This region has been at the bottom of the list for more than three years, before the recession began, due to the accelerating loss of market share by its once dominant motor vehicle industry. Then the recession cut jobs and income in this region more than in the rest of the country because of the usual cyclical plunge of its large manufacturing sector. Michigan (-19.6%) is experiencing the most severe economic decline in the US. Illinois (-8.7%) has recently weakened because of the plunge in its large off-road equipment and finance industries. Ohio, Indiana and Wisconsin are showing initial signs of recovery and are now declining less than the US average.

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Ranking States by Recent Economic Performance – August 2009