Handle Your Business

Economic growth slowed sharply in May in every part of the country as national economic growth slowed in response to higher commodity inflation, layoff due to the Japanese parts shortage and a significant drop in consumer and business confidence. Economic activity indexes declined marginally in twelve states. June growth trends are likely to be similar. June’s 8–10% drop in gasoline prices and rebounding equity prices should end the brief slowdown early in the summer.

New England is again the fastest growing region (over then last three months) followed closely by the Great Lakes and the South Atlantic regions. The gap between the fastest and slowest growing regions continues to narrow as the national, economic expansion matures so that most industries, excluding construction, are now expanding. Led by Massachusetts and New Hampshire, the New England economy is being boosted by the regions’ high concentration of high tech and intellectual property industries.

Only Maine and Alaska failed to expand in the last three months. Abrupt oil price changes make Alaskan growth very erratic. The usually stable Maine economy is being briefly hurt by sharp public spending cutback forced by previous overspending. Arkansas, Mississippi, New Jersey, South Carolina and Montana are expanding at less than a 1% annual pace in the last three months and are at risk for slipping back into recession.

Reduced auto production due both to slipping buyer confidence and unavailable Japanese parts has trimmed the recent growth rate in the auto dependent states in the Great Lakes and the Southeast.

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 growth rates are currently below the national growth rate because much of the 4th quarter GDP gain was due to exports. This data is not available immediately at the state level.

Almost all states will be cutting spending on July 1st when the new fiscal year begins and some will also raise taxes. Thousands of municipal governments will also be trimming spending. The negative impacts of these cutbacks will be noticeable in states that experience the largest cuts. This includes New York, Illinois, California and Florida, Wisconsin, Ohio and Texas and New Jersey.

Other high growth states — over 7% — in the last three months are North Dakota (pipelines, refineries and natural gas), Ohio (manufacturing) Oregon, (electronics rebound), North Dakota and Oklahoma (natural gas production expansion).

Among other larger states, Pennsylvania, Illinois, Michigan, Indiana and Texas are growing slightly faster than the US average while New Jersey, Georgia, Washington, Virginia are expanding slower than the US average.

North Dakota surpassed it pre-recession high economic activity index sixteen months ago. Economic activity rose above the pre-recession high in Massachusetts only in March. Economic activity in all other states remains below the pre-recession high level. New York and Texas should reach record high economic activity indexes in the spring. The shortfall from the pre-recession level is 10% or more in nine states, including over 20% in Michigan and Nevada.

Arizona, Florida, Idaho, Michigan and Nevada, the five most depressed states, all have very large problems with home foreclosures and falling home prices and each experienced significant outmigration during the long recession.

2011 regional economic growth trends will be dominated by differences in industry growth rates. The high growth industries through the end of 2011 will be manufacturing, energy production and business and professional services. Within this group, the fastest growth will be in motor vehicles, off road vehicles, electronics, industrial equipment, natural gas development and consulting services. Finance, construction, healthcare and education will achieve relatively slow growth. The government sector may decline.

Similar Posts:

• Construction Jobs Recovery Lags in the West
• Two Years Later, Small Business Economy Finally Improving
• Michigan Small Biz Giveaway … and Why Not Your State and Mine Too?
• Ranking States by Recent Economic Performance – March 2011
• Heavy Construction Spending Increased 0.4% in March