The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
FRBSF WEEKLY LETTEA Number 91-40, November 15, 1991 The Regional Concentration of Recessions On a national basis, this downturn can be considered mild when compared to previous recessions. In the seven other post-war recessions, real GNP declined more than 2 percent and the downturns lasted just under a year, on average. In this recession, however, real GNP declined a little over 1 percent, and at this point the fall-off appears to have lasted barely three quarters, depending on the exact timing of the trough. Some regions have been hit much harder than others, however. The Northeast, mid-Atlantic states, and California have experienced significant economic hardship reflected in job losses and burgeoning state budget deficits. The Pacific Northwest, Rocky Mountains, and North and South Central states, on the other hand, have sustained relatively robust conditions. and Idaho, respectively, to 1.2 percent in Oregon. The significant exception in the Twelfth District is California which has seen an employment decrease of 0.7 percent. (Recently published information, based on disappointing tax receipts, suggests that actual job losses in California may have been much greater.) Nationally, 21 states now have experienced employment declines since the peak month of July 1990. This is a small number when compared to the troughs of past recessions. In the mild 1969: 12-1970:11 recession the number was 27; in the severe 1981:07-1982:11 recession the number was 46. Is this divergence surprising? This Letter attempts to answer the question by considering how to measure the variation of employment growth across states, and particularly how to measure the concentration of a recession. The results suggest that job losses in the current recession are unusually concentrated when compared to previous economic downturns. While job declines in manufacturing sectors have spread across regions in their usual pattern, job losses in nonmanufacturing sectors have been unusually concentrated. The employment losses in these 21 states (plus the District of Columbia) totaled 1,185,000, and were only partially offset by employment gains of 436,000 in the remaining 29 states. The job losses were heavily concentrated in the Northeast. Three states-Massachusetts, New York, and New Jersey-account for 40.3 percent of the employment declines. This is striking because at the beginning of the recession in July 1990 only 13.5 percent of the nation's jobs were in these states. Adding declines from the rest of New England shows that the Northeast accounted for 50.6 percent of job losses, though it contained only 16.6 percent of the nation's jobs. In contrast, California had 7.6 percent of the job losses but 11.7 percent of national employment. Where have job losses occurred? Measuring employment loss concentration Our point of departure is an examination of percentage employment change between July 1990, considered the peak of the previous expansion, and August 1991, the latest month for which Bureau of Labor Statistics data are available for all states at this writing. Employment has grown in most Twelfth District states during this period at rates ranging from 4.0 and 3.7 percent in Utah Is this concentration of job losses unusual when compared to previous recession periods? To explore this requires a consistent measure of concentration of job losses in an economic downturn. This measure can be constructed by first arranging all 50 states in rank order according to the severity of employment losses-that is, as measured by the percentage decline or increase THE WESTERn ECOnOmy The Western Economy is a quarterly review of economic conditions in the Twelfth Federal Reserve District. It is published in the Weekly Letter on the third Friday of February, May, August and November. FRBSF in employment. The next step is to divide the rank-ordered list into fifths-or quintiles. One could simply do this by taking the first ten states as the first quintile, the next ten as the second quintile, and so forth. But this would ignore the differences in the size of each state's population. To adjust for population size, then, each state is weighted by beginning-of-period employment, and the list is divided into quintiles accordingly. Therefore, the first quintile represents 20 percent of the working population that live in regions hardest hit by recession, the second represents the next 20 percent, and so on until the fifth quintile represents the 20 percent of the working population livi ng in regions least affected by the econom ic downturn. (States that fall at the dividing point of two quintiles are distributed proportionately.) To measure the concentration of job losses, I then distribute the job losses across these quintiles to observe the proportion of job losses occurring in different regions. The percent of job losses that occurs in the first quintile can be interpreted as the proportion of economic distress occurring in the hardest hit areas. Chart 1 reports the proportion of job losses occurring in the quintiles of the current recession, and compares this to the average experience of seven previous recessions. For the current recession, the measure reveals that 59 percent of the job losses were suffered in states where the first quintile of the working population lives, the second quintile suffered 26 percent of the job losses, the third quintile the remaining 15 percent. The fourth and fifth quintiles, however, largely did not incur any job losses (less than 1 percent in the fourth), but instead were in states that had employment gains. This degree of concentration is not only striking compared to the average as the chart shows; it is also much more concentrated than in any of the recessions examined. For example, in the most concentrated previous recessions (60:4-61:2 and 80:1-80:7) the first quintile suffered 49 to 50 percent of the job losses. Sources of Concentration This measure illustrates that in the current recession, job losses are more heavily concentrated than in the orevious seven recessions. To exolore the source 6f this concentration, the samek'ind of analysis can be used to compare manufacturing and nonmanufacturing job losses. The results suggest that manufacturing job losses are more evenly distributed than nonmanufacturing losses. Chart 1 Recession Concentration Percent of Job Losses 100 Job-Loss Distribution Across Quintiles 90 80 70 60 50 40 30 20 10 4 5 o Average of Past 7 Recessions Current Recession Working Population Quintiles Job Loss in the Current Recession Quintiles rank-ordered from most to least severe job loss MA ME NH RI VT NJ CT MI DC NY I GA DE VA MD FL NC MO PA 4 3 2 1 I I TN CA IN AL I I OK WV WI IA IL SC AK OH KS WA MN 5 I KY MS WY LA NM TX OR MT HI NV ND AZ CO SD AR ID UT NE The concentration of manufacturing job losses in the current recession is close to the average of previous recessions. In contrast, while nonmanufacturing job losses are always more heavily concentrated than manufacturing losses, in the current recession nonmanufacturing job losses are even more concentrated than usual. One implication of these results is that as employment shifts away from manufacturing to the service and other nonmanufacturing sectors, future recessions might tend to be more geographically concentrated. Manufacturing job losses are more evenly distributed across states, perhaps because manufacturing facilities serve national markets. Service employees, however, are more tied to local or regional markets. The shift to a service-based economy thus suggests that a greater portion of employment will be subject to local or regional shocks. Brian Cromwell Economist DISTRICT INDICATORS (Seasonally Acljusted) 91Q3 91Q2 91Ql 90Q4 90Q3 90Q2 90Ql 89Q4 AGR I CULTURE u.s. CROP PRICES. 1985=100 DISTRICT CROP PRICES, 1985=100 FARM CASH RECEIPTS, MILLION $ CATTLE ON FEED. 1985=100 CATTLE PRICES. CALIFORNIA. S/CWT. 115.5 125.0 2463.8 84.1 63.2 117.3 132.5 2567.1 93.2 66.4 114.1 107.2 2451.8 93.1 64.5 114.5 109.7 2632.6 85.8 63.9 116.9 113.2 2627.6 88.4 65.9 117.5 111.6 2634.3 89.2 66.6 118.2 131.0 2621.9 89.9 63.6 115.4 115.9 2608.6 91.4 62.4 FORESTRY LUMBER PRODUCTION. MILLIONS BOARD FEET NORTHWEST LUMBER INVENTORY. MIL. BOARD FEET U.S. LUMBER PRICES, 1986=100 1584.5 2432.3 132.5 1524.3 2327.1 139.3 1397.3 2366.1 112.7 1347.0 2328.2 120.0 1550.9 2481.1 130.6 1654.3 2624.8 132.3 1751.9 2608.8 129.6 1795.0 2535.9 128.0 ENERGY SPOT PRICE OF OIL. S/BARREL U.S. RIG COUNT DISTRICT RIG COUNT FUEL MINING EMPLOYMENT. 1985=100 U.S. SEISMIC CREW COUNT. 21.6 796.1 72.7 72.5 100.7 20.8 909.8 82.5 73.3 110.6 22.1 980.7 75.8 75.5 117.9 32.1 1084.1 73.6 73.8 120.2 26.2 994.1 74.4 73.9 122.3 17.8 1038.2 72.8 73.9 128.4 21.8 921.7 56.8 75.5 127.2 20.3 1002.3 69.2 75.2 128.5 MINING MINERAL PRICES. 1986=100 METAL MINING EMPLOYMENT. 1985=100 106.6 184.2 109.4 185.3 107.6 192.9 111.9 198.0 129.7 197.4 127.6 199.2 123.7 196.6 125.4 193.9 CONSTRUCTI ON NONRESIDENTIAL AWARDS, 1985=100 RESIDENTIAL PERMITS WESTERN HOUSING STARTS. THOUSANDS CONSTRUCTION EMPLOYMENT. THOUSANDS 95.0 18519 24.1 1009.3 106.8 20675 25.5 1018.5 108.4 17576 15.6 1041.7 100.5 18219 18.6 1043.0 110.9 22860 29.1 1058.2 112.9 26468 31.2 1068.5 123.0 31871 30.7 1066.8 104.7 32866 29.3 1044.5 MANUFACTURING WAGES. CALI FORNIA. S/HOUR EMPLOYMENT. THOUSANDS DURABLES. 1985=100 CONSTRUCTI ON DURABLES. 1985=100 AEROSPACE. 1985=100 ELECTRONICS. 1985=100 SEMICONDUCTOR ORDERS, MILLIONS S, NOT S.A. 11.9 3014.5 96.1 100.5 106.3 89.9 1253.5 11.8 3037.1 97.0 101.0 108.3 91.3 1293.0 11.7 3081.4 98.4 103.2 110.8 92.2 1216.9 11.7 3097.7 99.7 104.3 113.1 92.4 1219.9 11.6 3124.8 101.3 108.0 115.3 92.7 1227.0 11.4 3143.6 102.2 110.1 117.7 93.1 1234.0 11.3 3158.3 103.0 112.0 118.3 93.8 1199.8 11.3 3160.4 103.6 112.5 117.5 93.9 1267.9 WHLS/RETAI L TRADE EMPLOYMENT, THOUSANDS RETAIL SALES, PACIFIC DISTRICT, MIL. $ 4809.2 25359 4810.9 24949 4836.9 24412 4823.7 25138 4827.2 25195 4805.6 24979 4773.0 24720 4752.6 23992 SERVICES EMPLOYMENT, THOUSANDS HEALTH CARE. 1985=100 BUSINESS SERVICES. 1985=100 HOTEL. 1985=100 RECREATION, 1985=100 5607.6 130.2 117.3 137.4 140.2 5570.4 129.2 118.9 137.5 140.1 5547.7 128.4 118.6 138.2 141.0 5509.4 127.6 115.7 139.7 142.0 5474.7 125.7 115.7 136.3 138.1 5400.7 124.1 116.1 135.0 135.8 5320.3 122.7 115.0 133.4 133.1 5261.6 122.0 111.7 131.9 135.8 FI NANCE. I NSUR. AND REAL ESTATE EMPLOYMENT 1268.4 1271.3 1274.5 1270.2 1269.7 1264.6 1256.2 1250.8 GOVERNMENT EMPLOYMENT, THOUSANDS FEDERAL GOVERNMENT STATE AND LOCAL 618.4 2923.3 614.9 2879.1 619.8 2860.7 616.7 2833.1 636.4 2825.9 655.0 2777.9 629.0 2755.8 624.6 2724.0 Data are weighted aggregates of available 12th District state data and are expressed as monthly rates unless otherwise noted. District indicator data are constructed by FRBSF research staff from publ ic and industry sources. Opinions expressed in this newsletter do not necessarily reflect the views of the management of the Federal Reserve Bank of San Francisco, or of the Board of Governors of the Federal Reserve System. Editorial comments may be addressed to the editor or to the author.... Free copies of Federal Reserve publications can be obtained from the Public Information Department, Federal Reserve Bank of San Francisco, P.O. Box 7702, San Francisco 94120. Phone (415) 974-2246, Fax (415) 974-3341. Printed on recycled paper lGlI> .... with soybean inks. ~~ OUt6 YJ 'OJSpUeJ:I ueS WLL XOl) 'O'd O)SI)UOJj UOS JO ~U08 aAJaSa~ IOJapaj ~uaw~Jodaa 4)JOaSa~ PERSONAL INCOME ANNUALIZED PERCENT GROWTH RATES Twelfth District Business Sentiment' GNP Percent 100 ALASKA ARIZONA CALIFORNIA HAWAII IDAHO NEVADA OREGON UTAH WASHINGTON 12TH DISTRICT U.S. 91Q2 91Q1 9OQ4 9OQ3 90Q2 2.6 5.6 4.9 4.8 10.7 3.2 4.6 7.8 4.3 8.4 7.1 0.2 4.1 -3.2 6.1 3.3 4.4 8.9 15.1 4.2 4.4 6.0 3.7 4.5 5.9 6.7 8.3 5.8 6.5 6.3 12.4 -1.0 12.8 6.0 9.3 7.7 4.5 6.7 5.5 10.8 8.5 9.1 7.0 9.9 6.7 5.0 4.3 1.6 1.3 5.2 3.8 6.7 5.4 6.1 5.9 80 o Recession 60 t'illl 40 • 20 o 01 0203 Q4 01 02030401 020304 1989 1990 * Yellr-to-date 1991 UNEMPLOYMENT RATES AVERAGE QUARTERLY DATA NON-AGRICULTURAL EMPLOYMENT ANNUALIZED PERCENT GROWTH RATES 12TH DISTRICT U.S. Growth greater than 3% • Expectations for national GNP growth li.rring the neXl four Cf.larters based on a survey of approximately 75 business leaders in the 12th Federal Reserve District. * Year-to-date ALASKA ARIZONA CALIFORNIA HAWAII IDAHO NEVADA OREGON UTAH WASHINGTON Growth less than 2.5% ml 2.5% to 3% growth 91Q3 91Q2 91Q1 9OQ4 9OQ3 -4.4 4.2 0.4 0.8 0.7 0.8 3.3 1.1 -0.9 -0.1 -0.2 -1.5 0.3 -0.6 -3.6 -2.4 2.4 -2.4 7.6 1.9 0.5 -0.9 0.8 -2.0 -2.7 0.5 6.4 0.4 3.5 4.3 3.7 3.3 4.5 6.6 0.7 5.5 2.8 4.9 1.4 1.3 3.9 7.6 1.4 2.3 3.5 0.7 0.4 -1.4 -1.2 1.5 -2.3 -0.3 -1.4 2.1 -0.2 ALASKA ARIZONA CALIFORNIA 91Q3 91Q2 91Q1 9OQ4 9OQ3 8.3 5.2 7.5 2.7 5.9 7.4 5.3 7.4 2.6 6.1 5.6 6.1 4.3 6.2 7.0 5.5 6.5 2.7 6.2 5.7 5.9 4.3 5.3 6.6 5.3 5.6 2.7 6.0 4.9 5.6 4.2 4.4 6.7 6.5 6.1 5.9 S.3 5.6 HAWAII IDAHO NEVADA OREGON UTAH WASHINGTON ~.8 7.3 4.6 7.8 2.6 6.4 5.9 5.8 4.6 6.3 12TH DISTRICT U.S. 6.8 6.8 6.9 6.8 * Year-to-date 5.6 5.7 5.3
@FedFRASER