Of the five U.S. recessions since 1979, Florida’s economy continued to expand throughout three of them. In contrast, Alaska has had eight recessions since 1979, but only three of them occurred during a national recession. In fact, over the past 37 years, only eight states have been in recession during — and only during — all five of those U.S. recessions.1 Whether a state’s economy hews closely to the expansions and contractions of the U.S. business cycle depends on a variety of factors, including the state’s industry mix and demographic trends. Florida’s economy, for instance, has been propelled by rapid population growth as one of the main Sun Belt destinations for domestic migration and as a gateway state for tens of thousands of Latin American immigrants each year. Energy price shocks have frequently buffeted Alaska’s economy, which relies heavily on the volatile and risk-prone oil industry.
Understanding a state’s unique trends as well as the geographic distribution of state recessions is of great interest to households, firms, and policymakers. Tracking state cycles helps clarify the underlying causes of national recessions,2 informs policymakers regarding appropriate monetary policy,3 and aids in recognizing in real time an emerging national recession.4
However, as this article will show, the greater volatility of state data and other complications make determining business cycles for an individual state more difficult than for the U.S. economy. Since 2005, the Federal Reserve Bank of Philadelphia has facilitated state business cycle research by producing coincident indexes of economic activity for all 50 states and the nation. Over the past decade, researchers have used the indexes to identify individual state business cycles.
This article appeared in the Fourth Quarter 2016 edition of Economic Insights. Download and read the full issue.
These states are Georgia, Kansas, Missouri, New Jersey, Ohio, South Carolina, Vermont, and Virginia.
See the research by Michael Owyang and his colleagues.
See the article by Gerald Carlino and Robert DeFina.
Ted Crone’s 2006 Business Review article goes into detail.