The U.S. economic recovery is now almost six years old (June 2009 was the final month of the recession). This recovery has been deemed weak, with both GDP and job growth remaining both erratic and uneven. Unemployment levels have declined to a sub 6% level from a 10% peak. However, this is still considered somewhat high, especially when looking at the number of people who have exited the workforce. In fact, the labor participation rate continues to fall, currently standing at 62.7%.
During the first quarter of 2015, there has been some more weak economic data. The March jobs report came in at a weak 126,000 new jobs, and the first quarter average is running at about 197,000. A number below 200,000 should temper the chances of an interest rate hike. Additionally, estimated first quarter GDP may come in below 1%, (some are forecasting about 0.5%) which would be disappointing.
Throughout this time, the Fed has kept interest rates at historically low levels. However, at its most recent meeting, the Fed changed its language to signal a higher likelihood of increased rates this year. Based on the recent data, it appears a rate hike may be pushed further out into 2015 or 2016. So the national economy is modestly improving, but this is certainly not your typical economic recovery.
Having said that, there are certainly regional and state pockets within the country that are performing just fine. In this study, select housing (building permits, mortgage delinquencies and mortgage foreclosures) and employment (jobs and unemployment rates) data are examined to determine trends. Housing and employment data were selected as they are generally considered leading or coincident economic indicators. The analysis compares current levels of these five indicators for all 50 states today vs. one year ago. As this information is tracked over time, it can provide a rather good indicator of how individual state economies are either improving or declining. The study is not intended to determine which are the best or worst performing economies, but rather what direction the economies are heading. It is interesting to look at national, regional, state, and even county trends.
4Q2014 STATE RANKINGS – Top 10 / Bottom 10
- Arizona (tie)
- North Dakota
- South Carolina
- Maryland (tie)
- Oklahoma (tie)
- West Virginia
- New Mexico
On the national level, all five indicators showed a positive trend. Either four or five indicators have been positive since 3Q2011. The magnitude of improvement has slowed somewhat, indicating the recovery is ongoing but modest. For 4Q14 vs. 4Q13, national results follow:
- Employment increased 1.2%
- Unemployment fell 14.9%
- Mortgage delinquencies declined 11.4%
- Mortgage foreclosures decreased 21.3%
- Building permits improved 5.6%
Improving trends are visible in the Midwest (Illinois, Wisconsin, Indiana and Michigan), Mountain (Utah, Nevada, Colorado, Idaho, and Arizona), and Pacific (California) regions.
Softer trends are present in Southeast Central (Alabama, Mississippi and Kentucky), Middle Atlantic (Pennsylvania and New York) and New England (Vermont, Rhode Island, Massachusetts and Connecticut) regions.
On the state level, areas that were particularly hard hit during the recession appear to be on the mend, including Nevada, Florida and Michigan.
Several states have been exhibiting very strong growth for the past several years, including Arizona, California, Colorado, Idaho, Minnesota, North Dakota, Texas and Utah.
States that have been struggling for the past several years include Alabama, Mississippi, New Mexico, Pennsylvania, and Vermont.
Not a Typical Economic Recovery
Overall, the trends are positive, but there is a great deal of noise in the numbers and the water is sometimes murky. This recovery is certainly not spread evenly over the country. Pockets of strength and weakness exist in different regions. Not surprisingly, states that generally perform well have diversified economies which include industries such as government, healthcare, military and technology. During this recovery, some more cyclical industries, such as auto and airlines, have been helping generate jobs. Therefore, it is important to look at trends over several quarters to get a clearer picture of change. Lastly, strong government leadership and management can play a critical role in shaping direction.
Bradford Langs, CFA, is the Chief Risk Officer at CoastalStates Bank in Hilton Head Island, South Carolina. He has over 25 years of experience in portfolio, credit and risk management from Wall Street to Main Street. He has compiled the quarterly Economic Indicators Report, based on two data sets on the employment side (employment and unemployment) and three data sets related to housing (building permits, mortgage delinquencies and foreclosures) for over 20 years.
Disclaimer: The opinions and statements expressed in this column are solely those of the author, who is solely responsible for the accuracy and completeness of this column. This column does not reflect the position or views of RICIC, LLC or MuniNetGuide.
The opinions and statements expressed on this website are for informational purposes only, and are not intended to provide investment advice or guidance in any way and do not represent a solicitation to buy, sell or hold any of the securities mentioned. Opinions and statements expressed reflect only the view or judgment of the author(s) at the time of publication, and are subject to change without notice. Information has been derived from sources deemed to be reliable, but the reliability of which is not guaranteed. Readers are encouraged to obtain official statements and other disclosure documents on their own and/or to consult with their own investment professional and advisors prior to making any investment decisions.
This is not a typical economic recovery. Overall, the trends, based on housing and employment data, are positive, but there is a great deal of noise in the numbers and the water is sometimes murky. Pockets of strength and weakness exist in different regions – and states – throughout the U.S.
AZ, CA, FL, MN, NM, TX, VT, WI, CO, ID, IN, MI, MS, NV, ND, PA, UT