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Wednesday, April 23, 2008

Could states' economies predict national recession?

To the vast majority of people, it doesn’t matter whether the United States is in a recession or not. They’re struggling financially.

More economists say they think we’re in a recession than in an economic slowdown. Federal Reserve Chairman Ben S. Bernanke even told Congress earlier this month that a recession is possible, but so is a rebound this year.

The official arbiter of when recessions begin and end is the National Bureau of Economic Analysis. Don’t call and ask if we’re in one now. The bureau doesn’t usually anoint a recession until seven months after it began.

But plenty of us keep looking for those clues to the state of the economy. In fact, in 2001, the Federal Reserve Bank of Philadelphia began looking at individual states to see if the health of the parts might have something to say about the whole.

Jason Novak, senior economic analyst at the Philly Fed, has been studying monthly “coincident index” data for the 50 states. The indexes are a compilation of labor-market conditions and real-wage data.

On Tuesday, the Fed released the February-to-March data, which show the indexes rising in 19 states, declining in 22 and unchanged in nine. Over the first quarter, the indexes are up for 31 states, down for 14 and unchanged for five.

To Novak, state economic trends offer more insight into current conditions than national trends alone. “It makes sense to understand local conditions, because we experience the economy locally,” he said in an e-mail.

In a paper, Novak did correlate declines in the state coincident indexes to the four most recent recessions. It’s possible that the indexes could give advance warning of recessions.

But he cautions that the indexes can deliver false positives and negatives because of revisions to employment data.

The good news? The recent data sure don’t indicate a recession.
Posted by Mike Armstrong @ 1:07 PM  Permalink | 2 comments
Comments   
  • 0 like this / 0 don't   •   Posted 4:11 PM, 04/23/2008
    us economies fall down in recession is not good for none in civilizate world,this time to make a revolution in stocks control and bank and loans house.
    — Hilson
  • 0 like this / 0 don't   •   Posted 10:39 AM, 04/22/2009
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    — franklin123


2 comments
About Mike Armstrong
Mike Armstrong, a business editor and writer for nearly two decades, is the Inquirer's business columnist and PhillyInc blog editor. Contact Mike via e-mail or at 215-854-2980
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