Nine States Projected to Contract in 2020: More on the Way

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by Mish Shedlock, The Maven:

Leading indicators at the state level project nine states will contract within the next six months.

State Leading Indicators

An analysis of State Leading Indicators by the Philadelphia Fed suggests nine states will be in contraction within six months.

The Federal Reserve Bank of Philadelphia has released the leading indexes for the 50 states for November 2019. The indexes are a six-month forecast of the state coincident indexes (also released by the Bank). Forty-one state coincident indexes are projected to grow over the next six months, and nine are expected to decrease. For comparison purposes, the Philadelphia Fed has also developed a similar leading index for its U.S. coincident index, which is projected to grow 1.4 percent over the next six months.

Philadelphia Fed Region

  • Pennsylvania: The leading index for Pennsylvania was -0.5 in November. The state’s coincident index decreased, and the index of delivery times from the Institute for Supply Management’s manufacturing survey rose in November. Building permits decreased, and initial unemployment insurance claims decreased in the same period. Overall, Pennsylvania’s leading index for November suggests contraction in the state’s economy in the second quarter of 2020.
  • New Jersey: The leading index for New Jersey was -0.2 in November. The state’s coincident index decreased, and the index of delivery times from the Institute for Supply Management’s manufacturing survey increased in November. Building permits rose, and initial unemployment insurance claims decreased in the same period. Overall, New Jersey’s leading index for November suggests contraction in the state’s economy in the second quarter of 2020.
  • Delaware: The leading index for Delaware was -0.7 in November. The state’s coincident index decreased, and building permits decreased in November. Additionally, the index of delivery times from the Institute for Supply Management’s manufacturing survey increased in November, while initial unemployment claims decreased. Overall, Delaware’s leading index for November suggests contraction in the state’s economy in the second quarter of 2020.

Those three states are in the Philadelphia Fed region. The Fed provided no details on the other states.

State Leading Index Map

Bloomberg reports Nine States Face Economic Contraction, Most Since 2009 Crisis

State Projections

  1. West Virginia: -4.5% to -1.5%
  2. Pennsylvania: -1.5% to -0.2%
  3. New Jersey: -1.5% to -0.2%
  4. Vermont: -1.5% to -0.2%
  5. Delaware: -1.5% to -0.2%
  6. Oklahoma: -1.5% to -0.2%
  7. Montana: -1.5% to -0.2%
  8. Iowa: -0.2% to 0.2%
  9. Kentucky: -0.2% to 0.2%
  10. Connecticut: -0.2% to 0.2

The Bloomberg article noted that Iowa and New Hampshire are expected to see marginal growth over the next few months. Thus, New Hampshire must be at the bottom end of its range.

Rising Initial Claims

I picked this idea up from Daniele DiMartino Booth.

Booth notes that “In December, nearly 2/3rds of states had rising initial claims YoY.”

Election Significance

I took a lot of flack from Trump supporters over my December 30 post Trump Will Easily Be Defeated in 2020, Perhaps a Landslide

But I stand by it. One of my reasons was the economy. Specifically, I stated “Trump’s trade policy has been a disaster to both farmers and the steel industry. Farming woes are well understood, but steel is another matter.

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