From the Philadelphia Fed:
The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for September 2014. In the past month, the indexes increased in 43 states, decreased in four, and remained stable in three, for a one-month diffusion index of 78. Over the past three months, the indexes increased in 44 states, decreased in five, and remained stable in one, for a three-month diffusion index of 78. For comparison purposes, the Philadelphia Fed has also developed a similar coincident index for the entire United States. The Philadelphia Fed’s U.S. index rose 0.3 percent in September and 0.9 percent over the past three months.
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The index is a combination of four-state level indicators:
The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.
A note of caution. While the coincident index can help to gauge a state’s economic activity, for several reasons it is not an adequate measure to rank states by economic activity/growth. The problem is that the index cannot control for variations between state economies. As noted by Paul Fiora, senior economist at the Philadelphia Fed:
“We do not consider state rankings based on the coincident and leading indexes to be valid,” says Paul Flora, Senior Economic Analyst at the Federal Reserve Bank of Philadelphia in an email to the Cap Times.
Flora says the differences in the various state economies influence the relative change in the index from month to month. He says an older, mature economy, such as New York, tends to experience smaller percentage changes than a smaller, younger economy, such as North Dakota.
“Comparisons between the two are not very meaningful,” he says.
Flora also warns there is significant volatility from month to month in the index, which is designed to serve as a proxy for a state’s GDP or gross domestic product.
“An individual state’s ranking based on the percent change can jump wildly from one end of a relatively narrow range to the other,” he says. “Rank order is not persistent, thus state rankings are misleading.”
Although the coincident index showed Maine’s economy continuing to improve, the three-month change for September was tempered relative to previous months.
Meanwhile, September proved to be another positive month for job growth in the state, with employment up 200 from the previous month, and 9,400 from a year ago. That 9,400 is the largest year-over-year gain for any month since the recession. In fact, 2014 has been the strongest year of the receovery in terms of job growth:
Although the unemployment rate ticked up 0.2 percentage points to 5.8% from last month, it is still down nearly a full percentage from a year ago when the UER was 6.6%.
In New England, the UER also ticked up slightly over the month, from 5.9% to 6.0%, but down 1.1 percentage points from a year ago. The northeast (New England and the Middle Atlantic region) saw the UER drop 0.1 percentage points to 6.1% from August, down 1.3 percentage points from last September.
The number of unemployed persons declined 6,000 from a year ago, and edged up 900 from August.
The year-over-year payroll changes by industry:
- Construction: 1,700
- Manufacturing: 700
- Trade/Trans./Util.: 900
- Financial Activities: 600
- Pro./Bus. Services: 1,200
- Education/Health Svcs: 2,400
- Leisure/Hospitality: 2,700
- Government: 100
Since the start of the recession, only education and health services, leisure and hospitality, and professional and business services are at or above pre-recession levels.
Of course, while job growth remains strong, job quality and wages remain weak.