The day trader in Manhattan and the wheat farmer in Kansas may see the same economic indicators on the 6 o'clock news, but they experience vastly different economic realities.
While figures on unemployment, deficits, trade, and GDP provide snapshots of the nation's economic situation, they obscure the fact that economic growth and well-being are anything but uniform nationwide. New data from the Bureau of Economic Analysis on state GDP figures show that 48 of 50 states, plus the District of Columbia, saw annual GDP increases in 2010. Beyond that, however, there are more differences than similarities among the states. While the recession appears to be over for the nation as a whole, it continues unabated in Nevada. Meanwhile, in Nebraska and the Dakotas, the recession never really hit. Retail trade is positive in all 50 states, but in some places, it is counterbalanced by the still-dragging construction sector, particularly in places hardest-hit by the bursting housing bubble, like Florida and Colorado.
Below are five states illustrating some of the most salient economic trends in the nation right now. Together, they show which industries are thriving or flagging and provide keys to how the nation's economy as a whole might grow.
Nevada--Housing and Unemployment Create a Vicious Cycle
Nevada is perhaps the state mired most deeply in economic crisis. It is the only state to have seen negative growth for each of the past three years and one of only two states (along with Wyoming) to see negative growth in 2010, at -0.2 percent, despite a booming mining sector and healthy hospitality industry. Nevada's construction sector was the key culprit for the state's decreasing GDP last year. According to the Bureau of Economic Analysis, construction reduced state growth by nearly two percentage points.
Of course, the health of the construction sector and housing market are inextricably linked, and the newest data show Nevada's housing market to be among the poorest in the nation. According to figures from the real estate data firm CoreLogic, Nevada has the highest rate of negative equity in the country, with 63 percent of all mortgaged properties under water, meaning owners owe more on their mortgages than the homes themselves are worth. Nevada also has the highest unemployment rate in the country, at 12.5 percent, as of April 2011. Unemployment makes for fewer homebuyers and more foreclosures, and a stagnant housing market means less mobility--meaning that many cannot move to find work elsewhere. [Check out a roundup of political cartoons on the economy.]
North Dakota--No Bubble, No Recession
North Dakota has the second-smallest economy of all states, with a GDP of nearly $31.3 billion in 2010. But the tiny economy has kicked into high gear. It had the fastest growth in the nation in 2010, with 7.1 percent, and has emerged from the recession largely unscathed. Indeed, at the height of the crisis in 2009, its GDP merely slowed down to 2.0 percent--an enviable rate of growth during a financial meltdown.
Part of North Dakota's good fortune stems from the fact that the state was largely insulated from the housing bubble. "When the coasts and the rest of the U.S. was really looking at a major housing boom...our economy was stable," says Frayne Olsen, assistant professor of agricultural economics at North Dakota State University. As a result, he says, "Once the housing bubble hit, we didn't have as far to fall."
In fact, while many states struggled last year to climb out of the disaster that was 2009, 2010 economic conditions seemed perfectly suited to further boost North Dakota's growth. High commodity prices made for big profits in the state's agriculture sector. And the combination of demand, high oil prices, and new drilling techniques all helped to bolster a booming oil industry. Now, says Olsen, parts of the state that are hotbeds of oil production have a rare problem--underemployment: "In the western half of the state, unemployment is about zero. They're scrambling for people and jobs."
California--Public Sector Woes
Many people look to Hollywood for what's in vogue, but Sacramento was also a trendsetter for what has become a nationwide phenomenon: budget problems. "California started [having] budget issues before most other states," says Jerry Nickelsburg, senior economist at the UCLA Anderson School of Management.
The state's financial woes have taken a large toll; altogether, the government sector has detracted from state economic growth more than in any other state, Curbing government spending has long been a problem in California, in part due to a plethora of programs and spending restrictions that voters have enacted via referenda over the years. Even after Gov. Jerry Brown proposed a budget in January that would cut $12.5 billion, the state's general fund budget is still expected to grow over the next four years from $88.8 billion to $112.5 billion, which would be its highest level yet. One major reason for the state's budget crisis is its highly progressive tax system, says Nickelsburg, which makes for volatile revenue levels: "So you have the upper end of the income distribution with a highly fluctuating income. That means a highly fluctuating state income."