Much less is known, however, about the degree of co-movement at the state and regional levels. Local economies are clearly influenced by aggregate and industry-specific shocks. Moreover, propagation mechanisms that transmit shocks across industries at the national level also operate at the sub-national level. But influences specific to regions and to particular industries within regions can intervene to alter cyclical behavior, such as the extent of co-movement, relative to that observed for industries at the national level. Indeed, the notions of a “rolling recovery” and of a “bi-coastal recession” used in journalistic discussions suggest an awareness that the magnitude and timing of fluctuations in business activity vary across regions. In this study, we quantify the degree of co-movement in quarterly one-digit industrial employment within and across states and regions. The analysis spans the years 1942 to 1995, a period that includes 10 national business cycles as defined by the National Bureau of Economic Research (NBER). 

View the Full Working Paper