Bloomberg News

Recovery Pushes U.S. States to Most BEES Gains Since 2010

March 30, 2012

General Motors Chevrolet Sonic and Buick Verano vehicles are welded while moving along the body shop production line at company's assembly plant in Lake Orion, Michigan. Photographer: Jeff Kowalsky/Bloomberg

General Motors Chevrolet Sonic and Buick Verano vehicles are welded while moving along the body shop production line at company's assembly plant in Lake Orion, Michigan. Photographer: Jeff Kowalsky/Bloomberg

More than two-thirds of U.S. state economies strengthened during the last three months of 2011, the widest advance in more than year, illustrating the spread of a recovery fueled by manufacturing and energy production.

The Bloomberg Economic Evaluation of States shows energy- rich North Dakota (STOND1:US) was the top performer in the fourth quarter, compared with the previous three months, followed by West Virginia, Nevada and Oklahoma. The gauge uses data on real estate, taxes, jobs and stock prices to chart the trajectory of 50 state economies. Michigan, Illinois, Idaho, Minnesota, Ohio and Florida rounded out the top 10.

“We haven’t felt that rising tide lifting all boats so far, but I think we’re on the verge of that,” said Robert Dye, chief economist for Comerica Bank (CMA:US), who reported yesterday that Michigan’s economy in January reached its strongest level in six years.

“What we see right now are regional pockets starting to turn around, and we can identify lots of pockets,” Dye said from Dallas in a telephone interview.

The index shows advances as the U.S. economy expanded at the fastest pace in 18 months and the Standard & Poor’s 500 Index had its best three-month stretch in more than two years. The gains by 34 states in the Bloomberg index were the broadest advance since the quarter ended September 2010. In the third quarter last year, only five states showed increases.

Battleground States

The improvement included key presidential battlegrounds such as the Midwest and Florida, where President Barack Obama and his Republican challenger will fight for electoral votes in November. Even with the gains, every state except North Dakota was worse off on Dec. 31 than at the end of 2008, three weeks before Obama took office.

Among the decliners were Vermont, whose stock index was the worst performer because of a 52 percent plunge by shares of Green Mountain Coffee Roasters Inc.; (GMCR:US) Wyoming, where tax revenue slid; and Alaska and New Mexico, both of which saw employment drop. North Carolina, Washington and New Jersey were also among the 13 states that performed worse in the period.

The BEES index is based on the performance of local-company shares, tax collections, home prices, mortgage delinquencies, job growth and personal income, giving equal weight to each component. It is intended to indicate the direction of each economy, rather than absolute health, so a state that’s quickly rebounding will receive a higher rank than one with a steady but slower pace of growth.

‘More Upbeat’

The U.S. economy has been expanding as employers add jobs at a faster pace and consumers become more confident about their prospects, encouraging them to spend more on big-ticket items such as automobiles. That’s helped lift Midwest manufacturing, while energy production has boosted resource-rich states.

“People across the country are a little more upbeat on the fact that the economic situation has stabilized in some areas and is increasing in others,” said Joseph Brusuelas, a senior economist with Bloomberg LP in New York. “The growth that’s driving it is in energy, mining and manufacturing.”

A boom in oil and natural-gas production in North Dakota pushed up tax collections and job growth at the fastest pace in the fourth quarter. Petroleum Development Corp. (PETD:US), an oil and gas driller, helped push West Virginia’s stocks higher. In Michigan and Ohio, mortgage delinquencies dropped as home prices rose. Illinois’s tax collections got a boost from Governor Pat Quinn’s tax increases.

Positive Shift

States including Texas, Connecticut and Minnesota picked up added revenue as 2011 drew to a close, while only 12 registered a drop. The tax-collection figures compiled in the index mark a positive shift for the economy after lower revenue led states to cut budgets, said Brusuelas, the Bloomberg economist.

“This is a sign that things are improving, albeit at a very slow pace,” he said.

There are also signs of recovery in states hardest hit by the home-price slide that began in 2006. Both Nevada and Florida registered a drop in mortgage delinquencies. In Arizona, housing prices rose 2.6 percent, more than any other state, according to the BEES index.

The outlook for the economy will hinge on whether the job growth of recent months can be sustained, Comerica’s Dye said.

“We’re on the verge here from transition from what I would call a weak and hobbled recovery into a self-sustaining expansion,” Dye said. “We’ve had a good start here in early 2012, and so far all the indicators suggest we should be able to keep that pace up.”

To contact the reporters on this story: William Selway in Washington at wselway@bloomberg.net;

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net


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