Five years after the 2008 financial crisis sent the U.S. economy into a tailspin, only a handful of states are charging full steam ahead. Four states’ economies are the shakiest and one of them, Delaware, is in danger of slipping back into recession. For the first time in five years, Moody’s Investors Service in August revised its overall outlook at the state level from “negative” to “stable,” due in large part to improving labor and housing markets that have boosted consumer confidence.
In a sign of how precarious and uneven the recovery is, Moody’s will later this week lift three states from being at risk of falling into recession to edging into recovery: Alabama, Illinois and Wisconsin.
But those recoveries are the weakest in the country, Steven G. Cochrane, managing director of Moody's Analytics, told Stateline.
Delaware remains at risk because of slow growth in the drivers of its economy, including banking, credit cards, pharmaceutical, chemical and business services, he said. Delaware, however, has taken issue with Moody’s assessment. “We believe Delaware’s future is more promising than Moody’s report would indicate,” says state Finance Secretary Tom Cook. He says employment will pick up this year as Bank of America has promised 500 new jobs over the next three years and Capital One has promised to hire 500 employees there by year’s end.
Across the states, Cochrane points to a “clear divide” between the robust recovery of states generally in the West and South, compared to states in the Northeast and Midwest, where growth is slower.
September marks five jittery years since the financial crisis unraveled the U.S. economy. At its peak, it pushed nearly 9 million Americans into the unemployment lines and more than 2 million homes into foreclosure. States generally have bounced back, with state tax collections growing for 13 straight quarters, according to figures from the Nelson A. Rockefeller Institute of Government. But the recovery is uneven. And factors well beyond state borders play a big role in recovery, including growth of the overall U.S. economy, fiscal problems in Europe and even a military strike in Syria that could create havoc in oil markets.
WEAKEST RECOVERIES AMONG THE 50 STATES
• Delaware is the only state “at risk” for slipping into recession, largely because it is seeing slow growth in the drivers of its economy, including banking, credit cards, pharmaceutical, chemical and business services.
• Alabama has seen improvements in manufacturing, on the strength of the auto plants there, including Mercedes Benz, Honda and Toyota, but employment and housing have been weak.
• Illinois, with the country’s second-highest unemployment rate is being helped by stronger demand from abroad for industrial machinery, affecting companies like Caterpillar and its suppliers in the state.
• Wisconsin’s housing and manufacturing have both stagnated, but export demand for industrial machine equipment has picked up. Low water levels in the Great Lakes have forced some shippers to reduce the amount of cargo they can bring in to the Green Bay port. (source: Moody’s Analytics)
SEVEN YEARS TO MAKE UP LOST JOBS
The U.S. is generating jobs at a pace of roughly 192,000 a month so far this year. At that rate it will take more than seven years to make up for the jobs lost by the recession, according to an analysis from the Brookings Institution. “It’s been a very weak recovery, there’s no two ways about it,” said Gary Burtless, senior fellow at Brookings.
Nationwide, 11.5 million Americans are still out of work, but that number nearly doubles when factoring in people who want to work but are so discouraged they have stopped looking (988,000) and adding the people who are working part-time because they cannot find full-time jobs (8.2 million).
By using this broader definition from the Bureau of Labor Statistics, Nevada would have a 19 percent unemployment rate, compared to its “official” jobless rate of 9.5 percent. California would see an 18.3 percent unemployment rate, rather than 8.7 percent. And Illinois and Michigan would reach 16.1 percent if the discouraged and part-timers were included, compared to their 9.2 percent and 8.8 percent official rates, respectively.
Oil-rich North Dakota and Texas cranked out jobs throughout the recession, but the Council of State Governments estimates just 13 states currently have employment at or above pre-recession levels. (The figures do not account for population growth.)
The fracking boom in North Dakota helped boost jobs there by a whopping 23 percent from December 2007 through June 2013, followed by Texas at 6.6 percent. Those two states accounted for only 8 percent of all U.S. jobs in 2009, but between them produced 18 percent of employment growth between 2009 and 2013, according to an analysis by James D. Hamilton, an economics professor at the University of California, San Diego.
Oil also helped Alaska gain nearly 5 percent more jobs and Oklahoma nearly 3 percent while farm commodities helped boost South Dakota’s employment by 2.5 percent. New York, Utah, Massachusetts, West Virginia, Colorado, Iowa, Louisiana and Montana saw an increase of 1 percent or less, according to CSG.
MIXED RECOVERY FOR STATES HIT HARD BY HOUSING
California, once maligned for its never-ending budget deficits and surge of foreclosures, is rebounding in spectacular fashion, leading the country in job creation last month. The state has added more than 800,000 of the 1.37 million jobs it lost during the downturn, according to an analysis from Beacon Economics, a research and consulting firm in Los Angeles.
“It’s pretty clear that California is pretty close to the top in terms of overall economic activity,” said Christopher Thornberg, founding partner of Beacon Economics. He credits a rebounding housing market and the state’s famed technology sector, the largest in the country.
But the recovery has been painfully slow elsewhere. “Even the worst delays at the airport don’t compare to the length of time we have been waiting for Florida’s economy to gain altitude,” Sean Snaith, director of the Institute for Economic Competitiveness, recently said.
Florida is outpacing national job growth and its unemployment rate is lower than the U.S. average, but the state ranks first in foreclosures and is second only to Nevada with the most mortgages underwater. Snaith said Florida’s economy could take off in 2014 if housing continues to improve.