Despite the Federal Reserve’s insistence that the U.S. economy is strong, necessitating an increase in their benchmark interest rate, a recent publication by Jason P. Brown, a senior economist at the Federal Reserve Bank of Kansas City, shows that economic growth across America is extremely uneven when we look at state-level data. The specific states studied by the author are those included in the Tenth Federal Reserve District and include Colorado, Kansas, Missouri, Nebraska, New Mexico, Oklahoma and Wyoming.
The author begins by noting that states with economies that are concentrated in specific sectors experience earlier economic slowdowns and remain in those slowdowns for a longer period of time. There are problems associated with defining economic turning points at the state level for two reasons:
1.) the National Bureau of Economic Research (NBER), the group responsible for dating business cycles on a national basis, does not identify state-level recessions.
2.) timely state-level economic indicators are limited with gross state product being available on a quarterly basis with a six month lag.
As you can see, the energy-producing states in the District (i.e. Kansas, New Mexico, Oklahoma and Wyoming) accounted for four of the six states in the nation that had negative economic growth between September 2015 and September 2016 with the other two states also being energy producers (i.e. North Dakota and Louisiana also shaded in green).
The author then breaks down the data further by looking at the period between June 2016 and September 2016 as shown on this map:
This examination of the variation in state-level economic growth suggests that the reality of a stagnating economy is coming to fruition. While the Fed is behaving as though all is well in the U.S. economy, this study would suggest that negative economic pressures are building.
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