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FABSF

WEEKLY LETTER

Number 92-42, November 27, 1992

Where's the Recovery?
u.s.

Technically, the
has been in an economic
recovery for a year and a half. After a contraction
in GOP that lasted from 1990.Q3 through 1991.Ql,
real output expanded in the subsequent six quarters at an annual rate of 1.5 percent. But this is a
weak performance compared to the previous six
recoveries, when the annual growth rate for the
first six quarters of expansion averaged 4.1 percent. Employment growth has been even more
sluggish, making the current expansion the weakest in job performance of any postwar recovery.
The number of jobs actually fell at a 0.3 percent
rate since the second quarter of 1992, compared
to an average 2.0 percent expansion seen in earIier recoveries.
A previous Weekly Letter (91-40) argued that the
recession was unusually concentrated in a few
key regions. This Weekly Letterfollows up that
analysis by identifying which regions are adding
jobs and which regions are holding down employment growth during the expansion period.
We find that while job gains are occurring in a
majority of states, far fewer states than usual are
reporting gains at this stage of a recovery. Moreover, the states that have continued to suffer job
losses during the expansion tend to be the same
ones that accounted for unusually large shares
of the job losses during the earlier contraction
in output.

Concentrated recession: July 1990-May 1991
The Business Cycle Dating Committee at the
National Bureau of Economic Research (NBER),
which has been dating peaks and troughs of recessions back to 1950, set the peak of the most
recent business cycle in July 1990, but it has not
yet dated the trough. Nevertheless, based on the
growth in real output, a case can be made that
the expansion began during the second quarter of
1991. Accordingly, this analysis uses May 1991 as
the trough month, and we examine the regional
pattern of employment growth both before and
after that month.

The period of economic contraction between
July 1990 and May 1991 showed an unusual
degree of regional variation in economic performance. During this period, 22 states actually
had job gains that totaled 190,000. This is the
largest number of states with job gains (and consequently the fewest number with job losses) of
any postwar recession. In the 1981-1982 recession, for example, only four states recorded job
gains.
Of the 28 states that recorded employment declines, a few key states accounted for a large
portion of the 1,890,000 jobs lost. For example,
New York, New Jersey, and Massachusetts accounted for 30 percent of the job losses. Adding
in the rest of New England raises the job losses
accounted for by the Northeast to 38 percent.
California accounted for 16 percent of the national job losses. As a result, the Northeast and
California combined accounted for over half of
the jobs lost in the recession, even though they
accounted for only 28 percent of the employment at the beginning of the period~a further
reflection of the concentrated nature of this
recession.

Unbalanced recovery:
May 1991-September 1992
The pattern of regional concentration of weakness has persisted during the period of expansion
from May 1991 to September 1992, the last period
for which dataare available. In total, employment
grew in some 30 states during this period, adding
601,000 jobs nationally. As shown in the figure,
the top ten performing states each enjoyed employment growth of over 2 percent, with Arkansas,
Utah, and Idaho expanding by over 3.5 percent.
In general, the Plains and Rocky Mountain states
have performed well, accounting for most of the
job growth over the period.
In contrast, some 20 states (and Washington, D.C.)
have lost employment during the expansion, for a

THE WESTERn ECOnOmy

The Western Economy is a quarterly
review of economic conditions in the Twelfth Federal Reserve District.

Total Nonagricultural Employment Growth Rates
Percent
May 1991 to Sep 1992
5
4
3
2
1

o
-1
-2

Worst Ten Performers
NH PA DE CAMA NY RI MD NJ CT
AR UT ID MTSD NDWVKSCONV

Best Ten Performers

~~j
-5

total job loss of 1,266,000. The ten worst performing states continued to suffer severe employment
losses ranging from 1.9 percent to 4.4 percent
since May 1991. Except for California, all are
Northeast or Mid-Atlantic states. New York lost
252,000 jobs, accounting for 20 percent of the
total jobs lost. Adding New Jersey and New England to the New York total brings the Northeast
total to 563,000 jobs lost during the period, or
44 percent of the continued employment decline.
California suffered the largest number (though
not the largest percent) of job losses: 321,000,
which accounts for a quarter of the total jobs
lost.
Thus the regions most responsible for job losses
during the contraction (the Northeast and California) continue to drive employment losses during
the expansion, accounting for almost two-thirds
of the gross job loss. With the job losses outweighing job gains, the state-level employment
figures reveal a net national job loss of 665,000.
Were it not for the losses in the Northeast and
California, however, this expansion would show
a net job gain of 219,000. This analysis suggests
that continued economics stress in these regions
is dragging down the national recovery.

How does this pattern of recovery compare to
past recoveries? To answer this question, we examined the corresponding sixteen-month periods
following the troughs of the six previous recessions. In all but one of the previous recoveries
almost all states enjoyed job growth. For example, sixteen months after the trough of the 1982~
1983 recession, 48 out of 50 states recorded expanding employment, and in the same period
after the trough of the 1974-1975 recession, 49
states enjoyed job growth. The one exception
is the period following the 1980.Ql-1980.Q3
recession, and that is because the economy expanded for only 12 months before dipping back
into recession beginning in July 1981. Except in
the period between the back-to-back recessions
then, the large number of states suffering employment losses in the current expansion is unprecedented in postwar history.

Does it matter?
The continued concentration of job losses in a
few states during the current economic expansion
suggests that many of the regional economic
problems that helped push the nation into the recession are still with us and therefore still work
as a drag on the economy. The stress in states still
experiencing job losses are related in part to adjustment to problems in specific sectors like commercial real estate and development, defenserelated industries, and aerospace. The adjustment of regional economies to the problems in
these sectors can be expected to be drawn out
over a number of years. The slow process of adjustment of regional economies would account in
part at least for the failure of the national economy to bounce back as smartly from the recent
economic downturn as it has following previous
recessions.

Brian Cromwell
Economist

Karen Trenholme
Research Associate

DISTRICT INDICATORS
(Seasonally Adjusted)

9203

9202

920i

9i04

9iQ3

9102

9101

9004

U.S. crop prices, 1985=100

107.9

108.2

109.6

111.0

114.5

116.1

113.3

114.7

District crop prices, 1985=100

111.6

102.2

113.7

108.4

120.7

129.1

107.4

113.0

AGRICULTURE

Farm cash receipts, million $

2529.4

2477.9 2500.4 2694.2 2529.5

2698.3 2529.0 2629.7

Cattle-on-feed, i 985=100

91.3

86.9

86.1

80.8

84.4

92.0

92.1

87.2

Cattle prices, Calnornla, $ICw!.

60.5

58,4

60.9

62.1

62.6

66.4

64.5

63.9

FORESTRY
Lumber production, millions board feet

1381.1

1287.1

1417.9 1351.8 1428.7 1467.7 1359.0 1360.5

Northwest lumber Inventory, mlllons board feet

2233.2

2263.1

2185.7 2302.6 2411.0 2307.8

147.3

154.4

U.S. lumber prices, 1986=100

157.1

137.2

131.2

138.3

2388.9 2340.3
113.8

120.6

ENERGY

21.7

21.1

18.9

21.8

21.6

20.8

22.1

32.1

681.6

696.0

650.9

789.1

802.6

924.3

951.1

1096.3

District rig count

59.7

68.9

55.6

60.9

73.3

83.8

73.2

74.5

Fuel mining employment, 1985=100

68.3

70.3

70.1

69.9

72.7

73.6

74.8

73.9

U.S. seismic crew count

71.2

81.3

80.2

89.7

98.4

110.2

117.9

120.3

Minerai prices, 1986=100

106.9

107.7

105.3

103.2

105.6

109.2

108.2

112.2

Metal mining employment, 1985=100

175.2

177.4

180.9

180.7

184.1

185.9

193.1

195.9

Spot price of 011, $/barrel
U.S. rig count

MINING

CONSTRUCTION
Nonresidential awards, 1985=100
Residential permits
Western housing starts, thousands
Construction employment, thousands

95.5

104.1

115.0

103.7

93.4

103.1

106.3

101.1

19586

19182

19780

19496

18524

19833

17667

18524

26.3

26.7

21.9

19.5

24.1

25.5

15.6

18.6

893.1

906.6

906.9

912.i

929.3

938.8

957.7

1002.0

12.2

12.1

12.0

11.9

11.8

11.8

11.7

MANUFACTURING
Wages, Calnornla, $Ihour
Employment, thousands

12.3
2871.1

2908.6 2948.0 2956.4 2982.4 3005.8 3050.3 3102.4

Durables, 1985=100

90.2

91.7

93.0

93.9

95.3

96.3

97.9

100.0

Construction durables, 1985=100

91.2

93.4

94.3

93.7

95.4

95.6

97.7

104.0

Aerospace, 1985=100

95.9

99.1

103.1

105.6

107.0

109.4

111.9

114.0

Electronics, 1985=100

86.0

87.3

87.8

88.5

90.6

92.2

92.8

92.4

Semiconductor orders, mil. $, not s.a.

1694.0

1540.6 1438.7 1387.3 1267.0 1297.0 1215.8 1203.8

Whlslretall trade employment, thousands

4652.4 4675.7 4701.4 4693.0 4713.4 4725.7 4725.7 4791.9

Retail sales, Pacnlc District, mil. $

25848

Services employment, thousands

5510.9 5502.6 5497.4 5488.5 5471.9 5445.0 5404.5 5441.2

25696

25881

25078

25445

25321

24655

25101

Health care, 1985=100

133.0

132.5

131.8

131.2

129.8

128.9

127.6

127.6

Business services, 1985=100

112.7

113.5

113.4

112.0

112.7

113.6

113.1

112.6

Hotel, 1985=100

130.8

132.3

133.3

134.5

131.7

132.1

132.1

1,35.4

Recreation, 1985=100

140.7

139.6

139.5

140.7

139.1

140.1

1382

139.6

FInance, Insurance, and real estate emp!., thousands

1234.4

1239.2 1244.3 1242.3

1245.0 1247.2 1247.9 1258.8

GOVERNMENT EMPLOYMENT, THOUSANDS
Federal government
State and local

602.7
2946.4

601.6

609.7

611.5

614.1

610.7

614.5

618.8

2906.0 2901.6 2883.8 2888.9 2863.2 2851.0 2842.2

Data are weighted aggregates of avall8ble 12th District data constructed by FRBSF staff from public 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.

~

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PERSONAL INCOME
Annualized Percent Growth Rates

Twelfth District Business Sentiment*
GOP
Percent
100 .-:o-=;?!"';;:-------------~---,

9202

92Ql

9104

91Q3

9102

Idaho
Nevada
Oregon
Utah
Washington

1.2
4.4
4.3
4.0
5.3
6.1
4.4
6.8
3.4

13.2
7.2
3.0
10.8
4.6
11.0
9.1
10.6
9.6

4.8
5.6
1.6
2.2
13.9
4.1
5.2
6.3
7.6

5.0
1.9
4.2
3.8
2.3
6.2
6.9
5.3
5.9

-0.8
4.8
5.5
1.4
12.0
4.1
4.5
7.1
5.8

12th Districl
U.S.

4.3
3.9

5.0
6.2

3.1
5.4

4.4
3.5

5.4
4.8

Alaska

Arizona
Calnomia

Hawaii

80

60

o Recession
•

2.5% to 3% growth

40

•

Growth above 3%

o Growth less than 2.5%

20

Q1

Q2

.. YeaHo-date

NON·AGRICULTURALEMPLOYMENT
Annualized Percent Growth Rates

92Q3

92Q2

92Ql

9104

Idaho
Nevada
Oregon
Utah
Washington

-0.5
4.1
-1.6
-3.5
1.8
0.7
-0.2
4.3
-1.6

-7.3
-1.2
-1.7
-1.3
-2.9
-1.6
0.1
1.9
-2.3

3.5
0.6
-0.5
1.2
5.9
4.2
3.6
3.0
1.8

7.3
-0.2
-3.4
1.4
5.9
4.2
1.5
2.0
2.9

0.6
2.8
-1.1
2.6
3.1
2.2
1.2
3.4
1.6

12th District
U.S.

-0.8
0.2

-1.5

0.6
-0.2

-1.3
-0.2

0.1
0.1

Arizona
Calnomia

Hawaii

• Year-to-date

Q1
1991

Q4

Q2

Q3

Q4

Q1

Q3

Q2

1992

UNEMPLOYMENT RATES
Average Quarterly Data

91Q3

Alaska

Q3

1990

"ExpectaUonsforGDPgroWltlduringthenextfourquartarsbasedona
survey of approximately 75 business leaders In the 12th Federal Reserve District

1.1

92Q3

92Q2

92Ql

9104

91Q3

Idaho
Nevada
Oregon
Utah
Washington

9.4
6.4
9.4
4.6
6.2
7.2
7.0
5.1
6.8

9.1
7.3
8.7
4.0
6.2
6.2
6.7
4.8
6.8

9.1
8.7
8.4
3.5
6.3
6.6
8.1
4.6
7.3

9.8
7.3
7.7
3.0
6.2
5.7
6.5
5.3
6.8

8.8
5.6
7.6
2.7
5.7
5.5
5.9
5.1
6.5

12th District
U.S.

8.4
7.6

7.9
7.5

8.0
7.2

7.2
7.0

6.9
6.8

Alaska

Arizona
California
Hawaii

• Year-Io-date

Q4