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Analysis of national employment statistics indicates 15 states already are in recession
March 5, 2001
NOTE: A national map showing each state and its economic condition is available from the Indiana Business Research Center at its Web site at http://www.ibrc.indiana.edu/media.html. The map is available in three formats, which should be publication quality. For more assistance in downloading this graphic, contact the center at 317-274-2979.
BLOOMINGTON, Ind. -- Increased productivity led to economic prosperity nationally over the last decade, but an Indiana University economist asserts that it also has resulted in increased unemployment in several areas, which could be a strong indicator of recession for at least 15 states and possibly another 12 states that he is monitoring.
"Normally when we talk about a recession, we talk about two consecutive quarters of decline in real output," explained Morton J. Marcus, director of the Indiana Business Research Center, "but let's consider another possibility: we could have situations where real output increases because of increases in productivity and people are losing their jobs.
"Unemployment is a serious matter. Amid great concern about the state of the U.S. economy, the January 2001 unemployment data from the U.S. Bureau of Labor Statistics were jumped on as evidence of a recession in the making."
From December to January, the number of unemployed persons nationally rose by 303,000, 5.4 percent. Some economists dismissed this increase because they expect a change of at least 300,000 in number of persons unemployed once every 10 months. At the same time, 163,000 more persons reported that they found employment -- the sixth straight month of employment gains -- to make the national economic picture even more murky.
Marcus decided to look at what happened at individual states and see how local economic conditions can tell a clearer story.
He and his colleagues at the center, based in IU's Kelley School of Business, closely examined official unemployment data for each state from last year. They identified nine states with two straight quarters of rising unemployment over the latter half of 2000 as being in recession. Another six states, with three straight quarters of increased unemployment, are considered to be even deeper into recession.
States that the center believes are in recession include those in every region of the nation, such as Alabama, Illinois, Maryland, Michigan, Minnesota, Missouri, North Carolina, Pennsylvania, Tennessee, Virginia and Washington, as well as the District of Columbia. States considered on the brink of recession or on the "watch list" include New York, Kentucky, Iowa and New Mexico.
At the same time, 23 states, including California, Indiana, Wisconsin, Florida, Texas and Virginia, had no increased unemployment in the most recent quarter and reported other labor market indicators at varying but not yet worrisome levels.
When there was a very small change in unemployment, researchers looked at other indicators for the labor market in that state, including whether there was a decline in employment or a rise in the number of persons unemployed.
"What we're trying to do is get people to understand that although we may be 'one nation under God,' we are not one nation when it comes to the economy. There is no sign of employment distress, when you look at it from a national point of view," Marcus said. "While there is no national recession, we should not be deluded into thinking that the still-positive national condition describes all of our diverse states.
"If a national recession comes along, it generally will affect certain industries and those industries tend to be located in certain states. It's no surprise to us that Michigan and Illinois, for example, are among the states that we believe are in recession," he added.
"We're not saying the other statistics are wrong, but these statistics deal not with the output of the country, but with the lives of people. We are trying to put a face on the economic reality of the country."
Marcus is surprised that Indiana is not on the watch list. "Cutbacks that have been taking place haven't been taking place in Indiana because some of the most modern industrial plants in the country are here and some of the most popular products being produced are made in Indiana," he said.
For example, trucks made at General Motors and Toyota facilities in Indiana have been very popular. Chrysler Corp.'s facilities in the state were not affected by the company's cutbacks because they are among the company's most productive.
Established in 1925, the Indiana Business Research Center is an integral unit within IU's Kelley School of Business. The center analyzes and disseminates economic and demographic information for and about the state of Indiana. Marcus has studied the Midwest and Indiana economies at IU since 1970, and is past-president of the Midwest Business Economics Association and the Association for Business and Economic Research.
For more information about the center, go to its Web site at http://www.ibrc.indiana.edu/
(George Vlahakis, 812-855-0846, gvlahaki@indiana.edu)