by Danielle Kurtzleben

June 20, 2011

These states exemplify broader economic trends in a country facing a slow recovery

The day trader in Manhattan and the wheat farmer in Kansas may see the same economic indicators on the 6 o'clock news, but they experience vastly different economic realities.

While figures on unemployment, deficits, trade, and GDP provide snapshots of the nation's economic situation, they obscure the fact that economic growth and well-being are anything but uniform nationwide. New data from the Bureau of Economic Analysis on state GDP figures show that 48 of 50 states, plus the District of Columbia, saw annual GDP increases in 2010. Beyond that, however, there are more differences than similarities among the states. While the recession appears to be over for the nation as a whole, it continues unabated in Nevada. Meanwhile, in Nebraska and the Dakotas, the recession never really hit. Retail trade is positive in all 50 states, but in some places, it is counterbalanced by the still-dragging construction sector, particularly in places hardest-hit by the bursting housing bubble, like Florida and Colorado.

Below are five states illustrating some of the most salient economic trends in the nation right now. Together, they show which industries are thriving or flagging and provide keys to how the nation's economy as a whole might grow.

Nevada -- Housing and Unemployment Create a Vicious Cycle

Nevada is perhaps the state mired most deeply in economic crisis. It is the only state to have seen negative growth for each of the past three years and one of only two states (along with Wyoming) to see negative growth in 2010, at -0.2 percent, despite a booming mining sector and healthy hospitality industry. Nevada's construction sector was the key culprit for the state's decreasing GDP last year. According to the Bureau of Economic Analysis, construction reduced state growth by nearly two percentage points.

Of course, the health of the construction sector and housing market are inextricably linked, and the newest data show Nevada's housing market to be among the poorest in the nation. According to figures from the real estate data firm CoreLogic, Nevada has the highest rate of negative equity in the country, with 63 percent of all mortgaged properties under water, meaning owners owe more on their mortgages than the homes themselves are worth. Nevada also has the highest unemployment rate in the country, at 12.5 percent, as of April 2011. Unemployment makes for fewer homebuyers and more foreclosures, and a stagnant housing market means less mobility -- meaning that many cannot move to find work elsewhere.

North Dakota -- No Bubble, No Recession

North Dakota has the second-smallest economy of all states, with a GDP of nearly $31.3 billion in 2010. But the tiny economy has kicked into high gear. It had the fastest growth in the nation in 2010, with 7.1 percent, and has emerged from the recession largely unscathed. Indeed, at the height of the crisis in 2009, its GDP merely slowed down to 2.0 percent -- an enviable rate of growth during a financial meltdown.

Part of North Dakota's good fortune stems from the fact that the state was largely insulated from the housing bubble. "When the coasts and the rest of the U.S. was really looking at a major housing boom...our economy was stable," says Frayne Olsen, assistant professor of agricultural economics at North Dakota State University. As a result, he says, "Once the housing bubble hit, we didn't have as far to fall."

In fact, while many states struggled last year to climb out of the disaster that was 2009, 2010 economic conditions seemed perfectly suited to further boost North Dakota's growth. High commodity prices made for big profits in the state's agriculture sector. And the combination of demand, high oil prices, and new drilling techniques all helped to bolster a booming oil industry. Now, says Olsen, parts of the state that are hotbeds of oil production have a rare problem -- underemployment: "In the western half of the state, unemployment is about zero. They're scrambling for people and jobs."

California -- Public Sector Woes

Many people look to Hollywood for what's in vogue, but Sacramento was also a trendsetter for what has become a nationwide phenomenon: budget problems. "California started [having] budget issues before most other states," says Jerry Nickelsburg, senior economist at the UCLA Anderson School of Management.

The state's financial woes have taken a large toll; altogether, the government sector has detracted from state economic growth more than in any other state, Curbing government spending has long been a problem in California, in part due to a plethora of programs and spending restrictions that voters have enacted via referenda over the years. Even after Gov. Jerry Brown proposed a budget in January that would cut $12.5 billion, the state's general fund budget is still expected to grow over the next four years from $88.8 billion to $112.5 billion, which would be its highest level yet. One major reason for the state's budget crisis is its highly progressive tax system, says Nickelsburg, which makes for volatile revenue levels: "So you have the upper end of the income distribution with a highly fluctuating income. That means a highly fluctuating state income."

The public sector has also been a drag on the state's employment rate, at a dismal 11.9 percent as of April. According to the Bureau of Labor Statistics, employment in the government sector decreased by 2.4 percent from April 2010 through April 2011. That reflects a nationwide trend; over that same period, government employment nationwide decreased by nearly 2 percent.

Nicklesburg says that manufacturing is a "bright spot" in the California economy and could help restore the state's economic health, leading to both higher state revenue and better employment figures.

Oregon -- The Changing Face of Manufacturing

Oregon saw some of the most robust growth in the nation last year. After taking one of the worst hits in the nation in 2009, with growth dropping by 4.9 percent, the state bounced back to grow by 3.4 percent in 2010, led by the manufacturing sector.

Oregon is an example of the changing nature of manufacturing. The state's manufacturing sector is driven largely by electronics and computer manufacturing, and particularly by computer processor manufacturer Intel, according to Tim Duy, director of the Oregon Economic Forum at the University of Oregon. Intel's largest campus is in Oregon and employs 15,000 -- nearly 1 percent of the state's nonfarm labor force. Like other tech manufacturers, it can give a huge boost to a state economy by creating high-value products that are in high demand and exported worldwide. As Duy says, "One chip is worth a lot, and they produce a lot of chips."

Technology is also changing the nature of manufacturing in the United States. Many manufacturing jobs in this industry are not the assembly-line positions of past decades but rather positions that require specialized technical skills. That labor force is one of the fastest-growing in Oregon; though the state's unemployment rate was at 9.5 percent as of April, manufacturing employment had also grown by 3 percent over the previous 12 months.

New York -- Finance Rebuilds the Economy It Helped to Cripple

New York had the second-highest rate of GDP growth from 2009 to 2010, with a 5.1 percent increase. And while the nation's financial woes arguably originated on Wall Street, so, too, is New York's recovery bolstered by Wall Street. The finance and insurance sector, one of the leading factors in U.S. GDP growth in 2010, accounted for more than one third of New York's growth last year.

Indeed, the health of stock markets closely mirrors the fortunes of the Empire State. "The S&P 500 index was up around 20 percent for the year [despite ups and downs], and that's always one of the most important indicators of New York's economic condition," Bob Ward, deputy director at the Nelson A. Rockefeller Institute of Government in Albany, wrote in an e-mail to U.S. News. He says the much-maligned bonuses that bank executives receive contribute to the state's well-being. "Wall Street profits and bonuses create jobs and income in other sectors, especially in New York City and its suburbs." The financial industry, then, may have been a major contributing factor to the state's improved job market. Over the course of 2010, New York's unemployment rate dropped by 0.7 percentage points.

 

Most States' GDP Shows Economic Growth, But Causes Vary