The Economist recently did an interesting article that examined where the U.S. economy was getting hit the hardest. The article found that economic "misery has been concentrated... in two set of states: the industrial Midwest and those states that was the biggest housing bubble, particularly California, Nevada, Arizona, and Florida." Much of the analysis, however, appears to have been based on unemployment rates in each state. While this is a useful metric, it may not be capturing the full extent of the economic distress given its known shortcomings. Consequently, I went to see what the Philadelphia Fed's state coincident indicator series are saying about regional economic activity. The data is on a monthly basis and the available observations run through December 2007. The fist bit of analysis I did was to simply look at the annualized growth rate for each state in December:
The above table reveals 27 states were contracting, while 23 were expanding. Next, I took the data and plugged it into some mapping software to get the following figure, where black = decline of 3% or greater, dark grey = decline of less than 3%, and light grey = expansion. In short, the darker the shading the greater the economic distress:
A few observations are in order. First, the hardest hit states are not the ones were the housing boom was the most pronounced. Thus, California, Nevada, Arizona, and Florida while experiencing a contraction in their economies are not being hammered as hard as the states in black. Second, while The Economist article showed the Northern Plain states to be doing relatively well, these information indicates otherwise--they are contracting. Third, Wyoming is doing so well relative to the other states and I assume it is because of higher commodity prices. If so, then why why is Kansas and Idaho dosing so poorly?
It will be interesting to see if January's data will show similar patterns.