Philadelphia Fed Reports That State Economies Are Improving With Future Gains Expected

by: Mark J. Perry

According to reports this week from the Philadelphia Federal Reserve:

1. Over the past three months through February, the coincident economic indexes increased in all 50 states (see top map above). The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic: nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index.

2. Based on the Philadelphia Fed's leading economic indexes, 47 states are predicted to see their economies improve in the coming months (see bottom map above). The leading index for each state predicts the six-month growth rate of the state’s coincident index. In addition to the coincident index, the models include other variables that lead the economy: state-level housing permits (1 to 4 units), state initial unemployment insurance claims, delivery times from the Institute for Supply Management (ISM) manufacturing survey, and the interest rate spread between the 10-year Treasury bond and the 3-month Treasury bill.

Only three states - New Mexico, Louisiana and Rhode Island - can expect lower growth in the next six months, and West Virginia has the strongest prospects, "likely due to a boost from natural gas drilling in the Marcellus Shale. The state also wasn't hit hard by the housing boom and bust, and has had far fewer government layoffs than other states," according to a CNN Money report.