Here is a moving bubble graph displaying how employment and average wages have changed in the 50 states, plus the District of Columbia, since 2000. The size of each bubble indicates the size of the state’s economy in constant dollars.

This post shows how the 50 largest metropolitan areas have changed economically since 2000.

What do we see? Our friends in the Washington DC area are doing quite well, having second highest average wage increase and being near the top in employment increase.

Detroit, our perennial ugly stepchild (they had a REALLY bad decade) had the greatest DECREASE in employment and the second greatest decrease in average wages.

New Orleans takes the prize for increase in average wage but also had the second greatest DECREASE in employment, suggesting that Hurricane Katrina destroyed a lot of lower paying jobs.

Austin takes the prize for INCREASE in employment but the greatest average wage DECREASE, pretty much the opposite of New Orleans.

Interestingly, after bouncing around a fair amount, New York is pretty much where it was in 2000 in terms of employment, while average wages have increased a bit.

We can create a chart like this for any state in the U.S.

Remember the big oil spill in the Gulf of Mexico caused by the Deepwater Horizon explosion? If you had kind of forgotten about it, so have most people, now that it no longer is front page news (or, to be a bit more 21st century about it, HOME page news). Back when the topic was still newsworthy we started tracking the economic impact but did not yet have enough data to see what the real impact was. Now we do, and this is what it looks like:

A quick explanation of what you are looking at… our metric here is our Economic Index, an index based on total wages paid in a county, seasonally- and inflation-adjusted, indexed to January 2006. We have computed indexes for all of the Gulf Coast counties of Alabama, Florida, Louisiana, and Mississippi. For simplicity of display, we have aggregated them by state.

We see that, not surprisingly, the economic impact of the disaster took until June to hit, but then it made a significant impact in each of the states except possibly Mississippi. The other three states had been in significant economic recoveries – though admittedly Florida less than Alabama and Louisiana – but those recoveries got totally flattened by the effects of the spill. The spill did not send their economies into a total tailspin, but it appears to have killed any kind of recovery, at least for now. Mississippi is the exception only because it had pretty much flat lined before the spill and the flat line continued after the spill.

I’ve gotten a couple of requests for a comparison of our current recession to the one in 2001. Before I get started, a few caveats.  The National Bureau of Economic Research is the ultimate authority on recessions, and the St. Louis Fed’s web site has a wealth of information on recessions and other economic topics.  I am not trying to be smarter than NBER or the Fed as I am unlikely to win that battle of wits.  Instead, I am providing a slightly different perspective, focusing on our Economic Index data.  As is described in previous posts, our Economic Index is based on total wages paid, seasonally and inflation adjusted. Below is a graph showing our Economic Index for the United States overall.  The 2001 and 2007-2009 recessions, as defined by NBER, are marked as the gray areas.  As always, the light blue area is our estimate period, and the light red area is our forecast. NBER considers the 2001 recession to have begun in March 2001 and ended in November 2001, lasting eight months.  Looking at our data, the beginning of the 2001 wage recession began in November 2000, three months before the beginning of the the economic recession, and lasted until and lasted until February 2003, making the wage recession 27 months, a bit more than three times as long as the economic recession. NBER considers the 2007-2009 recession to have begun in December 2007 and ended in June 2009, lasting 18 months.  The start of the wage recession, though, is in August 2007, with the end in January 2010, meaning that the wage recession lasted 29 months.  That makes this wage recession a little more than one and a half times the length of the economic recession, and only two months longer than the 2001-2003 wage recession. The depth of the two recessions was dramatically different.  The 2001-2003 wage recession involved a drop of 4.1 point, while the 2007-2010 wage recession involved a drop of 9.0 points.  In other words, the most recent wage recession was more than twice as deep as the the one in 2001-2003. Where do we go from here?  Can we learn anything from the wage recovery beginning in 2003 that might apply to our current recovery?    The 2003 wage recovery can be viewed as occurring in three phases: a few months of rapid improvement; a year of slow but steady improvement; and after which wage growth accelerates. Our current recovery is now three months into the second phase and seems to be following a similar pattern to the previous recovery, with very little wage growth.  Our 12 month forecast (the red area) appears to take the second phase out to the limit of our forecast, though with a slight ramping up at the tail end which could be indicative of the beginning of the third phase. The forecast is plausible.  Whether it is right remains to be seen.

This evening I was surfing the net and happened to read Paul Krugman’s editorial in the New York Times titled The Angry Rich.   In one of the final paragraphs, Krugman says, “You see, the rich are different from you and me: they have more influence. It’s partly a matter of campaign contributions, but it’s also a matter of social pressure, since politicians spend a lot of time hanging out with the wealthy.”  This reminded me of a graph I included in a presentation a couple of days ago, shown below.

Our Economic Index represents total wages paid, seasonally and inflation adjusted, indexed to January 2000.  In short, it shows the pattern of total real wages paid in a particular area over time.  The areas shown in the graph are the entire United States (blue line) and the Washington D.C. metropolitan area (red line).  Note that the data covers both government AND private employees in the D.C. area.  Of course, many (or most) of the private employees in D.C. directly or indirectly support the government ones.  The gray areas are recessions; the blue area is our estimates which bring relatively old government data up to date; and the red area is our forecast for the next year.

What immediately jumps out is that the economy of Washington D.C. is quite different than that of Main Street, U.S.A.  Recession?  What recession?  The folks deciding how economic pain is distributed apparently aren’t feeling that pain at all.

Note that Washington DID feel the 2001 recession as severely as the country as a whole, and more abruptly.  Also interesting is that after 9/11, the line does not go up nearly as steeply as I would have expected, at least until 2003.  After that Washington stayed in a pretty steep climb, with a few wobbles following the rest of the county, until the finance sector hit the fan in 2007.  But even then, and all through the recent recession, Washington stayed level while the rest of the country went into a nose dive.

Being someone who tends to lean a bit to toward being a Democrat (but only a bit), I will smugly note how much the Washington economy grew during the Bush years and how it has been flat during the Obama administration, while conveniently ignoring the rightmost part of the graph…

The July Economic Index data is now available and I took a look at a bunch of metropolitan areas, a set that created a reasonably easy to read graph.  What shows up is quite amazing: a clear recovery.  And this is not just a function of choosing the right set of metro areas – when I add other metro areas, I see the same pattern.  The lines just start overlapping and crossing, making a less attractive graph.

The graph below shows eight metro areas: Chicago, Dallas, Denver, Detroit, Minneapolis, Phoenix, San Francisco, and Seattle.  Ignoring Detroit for the moment – everyone knows they have been deep in the tank for along time – all of the other metro areas bottomed out in March or April of this year, followed by a sharp improvement in the months since then, though all of them seem to have leveled off a bit in July.  Admittedly San Francisco follows the pattern but much less dramatically than the others.  And both San Francisco and Chicago both show a slight decline from June to July.

Another happy surprise is Detroit, which seems to be showing slow but steady improvement since March.

A brief reminder of what the Economic Index is: it is an index based on total wages paid in an area, both seasonally and inflation adjusted.  The wages are those paid in non-farm employment and exclude sole proprietors and most government employees.

Also, a reminder of what the different colored regions on the graph represent.  The white area is based on actual historical data from the Bureau of Labor Statistics.  The light blue area is our estimate of what has happened from the end of the historical data through the end of last month.  The light red area is a forecast based on both history and estimates.  Like all forecasts, it assumes that the future will follow the same pattern as the past, that is, that things will keep going like they have been.  Reality, though, tends to have a mind of its own.  The future never follows the patterns of the past for very long, and unforeseeable events sooner or later (usually sooner) turn all forecasts into comedy fodder.  In other words, we don’t take our forecasts very seriously and you shouldn’t either.  What a forecast really shows you is the general trend as of the end of the estimate period.

How widespread is this recovery?  In looking at the change in economic index from March to July 2010, we find an improvement of 2 points or more in 321 of 361 metropolitan areas.  Of the 40 remaining metro areas, the worst March to July decline was only 1.3 points, contrasted with the greatest increase being 23.5 points, and all of the top five had improved more than 10 points.  In short, our data is suggesting that since March the economy has significantly improved in most metropolitan areas across the country.

What’s happening in the housing market?  There are many economic indicators that are used to answer this question.  The Case-Shiller Home Price Index tracks changes in the value of residential real estate both nationally and in 20 metropolitan regions.  Housing starts are another important indicator, with July numbers released yesterday as reported by MarketWatch and CNN Money.  There is the home-builder confidence index, which is a more subjective measure of the market.  And the list goes on.

We have developed our own Residential Construction index measuring the total wages paid in the Residential Building Construction industry (NAICS 2361).  This category includes builders of new single- and multi-family residences as well as remodelers.  Like all our indexes, it is based on seasonally and inflation adjusted data.

I picked out five counties whose indexes paint a picture of the differences around the country: Hennepin County, MN (Minneapolis); Los Angeles County, CA (Los Angeles); Miami-Dade County, FL (Miami); Orange County, FL (Orlando); and Orleans Parish, LA (New Orleans).  Since Orlando dwarfs the other areas, I include a graphs with and without Orlando.

Orlando experienced a huge building boom starting in 2004, peaking in early 2006, followed by a steep decline starting in early 2007 and not really leveling out until late 2009.  Right now, residential construction in Orlando appears to be in slow decline.  Overall, though, Orlando is the top performer of the five cities.

Miami followed a similar boom pattern as Orlando but on a much smaller scale.  Furthermore, while the downturn has taken Orlando back to pre-boom levels, Miami has ended up well below.  Miami’s residential construction took a more dramatic hit than any of the other four areas when the economy hit the skids in early 2009.  The good news for Miami is that its residential construction appears to have leveled off or even, maybe, started climbing.

Los Angeles followed a similar pattern to Miami’s, except in early 2009 residential construction in Los Angeles continued a steady decline in contrast to Miami falling off a cliff.  Los Angeles appears to be leveling out, but there is not yet any hint of an upturn.

New Orleans shows the impact of Katrina with residential construction sharply depressed immediately after the hurricane, followed by a boom that, to an extent, has continued until the present. New Orleans has lots of ups and downs, but it appears that residential construction there has more-or-less leveled out for now.

Last but not… Sigh…  Last AND least is my home, Minneapolis.  We never soared as high as the others, and we have paralleled the slow, steady decline of Los Angeles, unfortunately starting from a lower base.  Like LA, things seem to be leveling out but there is no sign of an upturn.

Looking at the five together one could conclude that we aren’t out of the woods yet with residential construction, but the trajectory seems to be leveling off.

The Deepwater Horizon oil rig blew up and sank almost four months ago, starting the worst oil spill in U.S. history. The question we asked shortly after was, “How will this environmental disaster impact the economies of the gulf coast counties?” Here we give an update on what we are seeing.

Our current data goes through June, which should begin to show the impact of the disaster. Yet, looking at the graphs below, we are not yet seeing any negative economic signs for the gulf coast counties as a whole.  Beginning in the first few months of this year, the economies of gulf coast counties in all four states began a significant upswing. This does not mean that there aren’t any negative impacts from the oil disaster. It just means that they either are occurring in domains not well covered by our data sources (e.g. fishing) or are small compared to the county economies as a whole.  Furthermore, some portion of the upswing is likely due to BP’s infusion of cleanup money into the area, an infusion that will eventually taper off.

Our data looks at total wages paid in all industries.  When time permits, we will do an analysis of two industries most likely impacted by Deepwater Horizon: Oil and Gas Well Drilling, and Leisure and Hospitality.  The Bureau of Labor Statistics has articles on these industries, but their data ends in September 2009, long before any of us had heard of Deepwater Horizon.

The talking heads warn of a “double dip” recession, so we have started taking a look for signs that it is occurring. Some bad news here, but also some good news.

This analysis, as with most of our current work, is focused on our Economic Index (EI) which is a localized index of total wages. The standard definition of a recession is two consecutive quarters of negative growth in GDP, so we look for two consecutive quarters of declining total wages. Given the inherent inaccuracies in economic data, we only consider a decline to exist if the local Economic Index drops by 0.5 or more between Q3 2009 and Q4 2009, and between Q4 2009 and Q1 2010. Using these criteria, we found 20 Metropolitan Statistical Areas (MSAs) that appear to be in recession. We ordered those MSAs by total decline in Economic Index over that time.

On the chart, the MSAs are listed alphabetically. Yuma and Longview, the two that appear by the numbers to be most deeply in recession, are the light blue and green lines. Note that these two appear to have turned the corner and are rapidly improving. In contrast, Sumner, SC does not appear to have experienced the recovery at all as it has been on a continuous slide since late 2006. Holland, MI is part of the auto industry mess, which we have discussed in previous posts. No surprises with that one.

The fifth MSA on the list, and top line on the chart – Cumberland, MD – visually seems to be an anomaly. How could it be near the top of the list? This is a good example of a case where the numbers can be misleading. The numbers suggest Cumberland is not doing well; the chart suggests that they are okay.

There are three biggies in the list: Chicago, San Francisco, and New York, none of which made the Top 5. Below is their chart.

The bad news is that they are still technically in recession. The good news is that all three appear to have leveled out. Hopefully, in coming months, we will see their lines bend upward.

Today Federal Reserve Chairman Ben Bernanke provided a cautiously optimistic view of the U.S. economy based on the Fed’s Beige Book.  Where is the economy humming, and where is it still in the tank?  In the previous post, we looked at the relative change of Metropolitan Statistical Area (MSA) economic indexes since January 2006.  Indexes are great for comparing the performance of areas of different sizes, but a tiny economy that grows dramatically will only be round-off error compared to, say, New York growing a little.  In this post we look at which MSAs are growing the most on an absolute basis, and which are shrinking the most.  As with the majority of our analysis these days, we focus on total wages paid per month.  In this post we also focus on the past year rather than changes since 2006.

Here are the MSAs that had the greatest growth in total monthly wages paid between April 2009 and April 2010:

Now check out the rest of the story, the MSAs whose total wages dropped the most during the same period of time:

One of the things I find interesting is that San Jose is #3 in growth, and just up the peninsula San Francisco is #3 in decline. Is the Bay Area economy literally going South?  San Jose is the only ray of sunshine for California on these lists – all other Golden State entries are on the side of gloom and doom.

With very little zeal, I can say that in the past year we Vikings fans have fared better than the Cheeseheads in Milwaukee.  If we were both on the good list I would have more enthusiasm.  Hey cheeseheads – did having Favre join the good guys throw your total economy into disarray?  Sorry – I couldn’t resist.

As of April, which Metropolitan Statistical Areas are doing the best compared to the beginning of 2006, and which are doing the worst?  Here are top 20 (best first) by Economic Index (EI):

A preliminary analysis of Jacksonville, NC indicates that the growth there is broad-based.  The growth in Kennewick, WA appears to be related to food production.  Growth in Louisiana is likely due to recovery from Hurricane Katrina.  Growth in Killeen, TX appears broad-based.  The others will require more digging.

Now for the 20 ugliest (worst first):

For the bottom 20, the biggest drivers appear to be the decline of the U.S. auto industry and the housing market.  As with the top 20, a more detailed analysis might yield some surprises.

Packers and Browns, too.  Economically speaking, how do the major metropolitan areas in the Upper Midwest compare?  We ran the numbers for Minneapolis, Milwaukee, Chicago, Cleveland, and Detroit.  Here is the graph:

The nice surprise is that the Twin Cities is at the top of the list and, more importantly, WE ARE AHEAD OF THE CHEESEHEADS IN MILWAUKEE!  Admittedly not by much, and admittedly our superiority is based on estimates, but we Vikings fans will take whatever we can get.  Like Brett Favre, for example.  But I digress.

The official data goes through Q3 2009, and at that point Minneapolis, Milwaukee, and Chicago were in a better place than Cleveland or Detroit, but were still in serious decline where Cleveland and Detroit appeared to have leveled off.

Our estimates for the seven months since the official data ends indicate that Minneapolis, Milwaukee, and Cleveland appear to be slowly recovering, with the upswing in Milwaukee being a bit stronger than that in Minneapolis or Cleveland (darn you, Cheeseheads!).  Chicago and Detroit appear to have leveled off, though Detroit is down almost twice as much as the next worst metro area (Cleveland) and its trend still appears to be downward.

Also interesting is that Minneapolis and Detroit show similar patterns from mid-2008 to mid-2009, though the drop for Detroit was much more severe than for Minneapolis.  I will research that and report on it in a future blog entry if I find anything interesting.

Overall, good news for Minneapolis, Milwaukee, and Cleveland, and cautious optimism for Chicago.

Unless you have been living in a cave, you know about the massive, still uncontained, oil mess in the Gulf of Mexico. This thing is going to have some major economic consequences worldwide. The most immediate and acute impact will be in the Gulf Coast counties of Louisiana, Mississippi, Alabama, and Florida. What will these consequences be? Will those counties’ economies immediately go down the tubes? Or will the clean-up money BP injects into the local economy actually give a boost, at least for awhile? Inquiring minds want to know.

At this point we obviously cannot tell you what will happen with the economies of the affected area – we’re clever, but not that clever – but we can tell you what has happened in the past, and then we can follow it over the coming months to see what the future holds.

How do we measure the economic impact? We will start off by looking at total wages paid in the counties, indexed with January 2006 as the baseline.   Why total wages?  Because total wages are the single best indicator of economic health of an area because they represent the total money being injected into the local economy.  Sure, a chunk of wages goes into income and other taxes.  And money is not always spent in the same location where it is earned.  But we are looking at wages at a county level,  and most people live and work in the same county.

If you are not familiar with indexing, you might wonder why we index total wages rather than just give the real numbers.  Indexing allows us to compare the relative change in counties that have significant differences in absolute numbers.

While we could provide this information for each Gulf Coast county individually, for now we will aggregate by state to avoid burying readers in too much data.

With that introduction, here is the data:

What we see is that, as of April (before any impact of the spill would register), the Gulf Coast county economies seemed to be on the mend. The Louisiana and Mississippi counties improved dramatically since 2006 mainly because they were recovering from Hurricane Katrina. Florida’s economy was headed south even before the subprime mortgage fiasco hit. The Alabama counties were doing OK until early 2009, when they followed much of the rest of the country into the Great Recession, ending up in April 2010 only slightly ahead of where they had been at the beginning of 2006. But starting in late 2009 or early 2010, the Gulf Coast counties in all four states seemed to be on the upswing.

Check back over the coming months as we follow these counties. We will track extend the graph above, and we will look at the data in other ways, such as looking at the fishing industry in particular. And if you have suggestions, please let us know.

In case you ware wondering which counties we are including, here is the list.

Florida:
Bay, Broward, Charlotte, Citrus, Collier, Dixie, Escambia, Franklin, Gulf, Hernando, Hillsborough, Jefferson, Lee, Levy, Manatee, Miami-Dade, Monroe, Okaloosa, Palm Beach, Pasco, Pinellas, Santa Rosa, Sarasota, Taylor, Wakulla, Walton

Louisiana:
Cameron, Iberia, Jefferson, Lafourche, Orleans, Plaquemines, St. Bernard, St. Mary, St. Tammany, Terrebonne, Vermilion

Mississippi:
Hancock, Harrison, Jackson

Alabama:
Baldwin, Mobile