Im-Politic: More Evidence that Trump-ers Were Mainly Voting Their Pocketbooks

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Commerce Department, Great Recession, Hillary Clinton, Im-Politic, inflation-adjusted growth, manufacturing, recovery, states, Trump

One of my favorite statistical reports just came out a week ago – the Commerce Department’s survey of economic growth last year in each of the 50 states plus the District of Columbia. I like the report so much mainly because it’s accompanied by the release of figures that show how much manufacturing production changed in real terms on an annual basis – and therefore gives us another indication as to whether or not the sector really has recovered from the Great Recession completely. (Spoiler alert: It hasn’t. But more on that later.)

This year, the new state numbers provide some new insights into why last year’s presidential election turned out as it did. Specifically, it shows a strong relationship between a state’s economic performance and its award of electoral votes to President Trump or his Democratic rival, former Secretary of State Hillary Clinton.

To begin, here’s a list of the “Top Ten” states that enjoyed the fastest inflation-adjusted growth between 2015 and 2016. (Because of ties, there are actually 21 of them). Their real percentage growth in 2016 is next to their names, then comes their rank (in parentheses) and then their presidential choice:

Washington 3.7 (1) Clinton

Oregon 3.3 (2) Clinton

Utah 3.0 (3) Trump

NH 3.0 (3) Clinton

Fla. 3.0 (3) Trump

Georgia 3.0 (3) Trump

Utah 3.0 (3) Trump

Calif. 2.9 (4) Clinton

Nevada 2.4 (5) Clinton

DC 2.4 (5) Clinton

Arizona 2.1 (6) Trump

So. Carolina 2.1 (6) Trump

Hawaii 2.1 (6) Clinton

Tenn. 2.0 (7) Trump

Colorado 2.0 (7) Clinton

Mass. 2.0 (7) Clinton

Idaho 1.8 (8) Trump

Michigan 1.8 (8) Trump

Ohio 1.7 (9) Trump

So. Dakota 1.7 (9) Trump

No. Carolina 1.6 (10) Trump

At first glance, the election seems like a toss-up in terms of the economic winner states, with Mr. Trump winning twelve and Clinton nine. But in terms of one of the main questions posed about the president’s supporters – whether they were motivated mainly by economic concerns or by other hopes or fears (ranging from racism and xenophobia to mistrust of Clinton) – this list looks like it points to the latter.

But here’s where some context needs to be considered. After all, the president won 32 (or 62.75 percent) of the states (including D.C.) up for grabs. Clinton won only 19. But the Trump share of the economic winners was somewhat lower – 12 of 21, or 57.4 percent. So maybe economic issues were fairly prominent among the Trump-ers.

More convincing evidence comes from the list of the worst performing states in 2016. Here they are in the same format used for the first list. (These states total eleven due to a tie):

No. Dakota -6.5 (1) Trump

Alaska -5.0 (2) Trump

Wyoming -3.6 (3) Trump

Oklahoma -2.3 (4) Trump

West Va. -0.9 (5) Trump

Louisiana -0.6 (6) Trump

New Mex. -0.5 (7) Clinton

Kansas 0.2 (8) Trump

Montana 0.2 (8) Trump

Texas 0.4 (9) Trump

Delaware 0.3 (10) Clinton

In fact, this evidence couldn’t be clearer. President Trump won nine of these eleven slowest-growing states.

These results don’t finally resolve the debate over Trump voters by a long shot – if only because the nation’s population is so unevenly distributed among states, and because of the winner-take-all nature of the Electoral College (except in Maine and Nebraska). Moreover, there’s not always such a bright line between economic and non-economic concerns, and many voters base their choices on several considerations.

Finally, it would be important to examine the economic growth trends over a longer period of time. That way, we could see whether various states’ expansion or contraction last year was consistent with longer-term trends or whether they were outliers. (Those distinctions presumably would have some influence over voters’ views of their own fortunes and the appeal of incumbents – or representatives of incumbent administrations – and challengers.)

But the news that nine of the 19 states won by Clinton were among the nation’s fastest growers, and only two were among the slowest, lends more support to the view that pocketbook issues created a big divide in the electorate last year.

And about that manufacturing news: The industry data released along with the new states growth shows that American domestic manufacturing’s output fell by 0.15 percent in constant dollar terms. That’s not much, but recall that it’s only a tenth as fast as even the negligible growth registered by the economy as a whole after inflation – 1.54 percent.

And thanks largely to this down year, from the last quarter of 2007 (when the Great Recession began) until the last quarter of last year (the latest quarterly data available), real manufacturing production shrank by 2.37 percent. As RealityChek readers know, there are several measures of manufacturing output used by the government – but they also know that most, like these latest data, show that the claim that America’s manufacturers have never turned out more product in this country than ever in the nation’s history are just peddling fakeonomics.

(What’s Left of) Our Economy: The Good Economic News that Trump Has Missed

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bubble, bubble decade, business spending, CNBC, Commerce Department, Financial Crisis, GDP, gross domestic product, housing, inflation-adjusted growth, investment, Jeff Cox, personal consumption, real GDP, Trump, Wilbur Ross, {What's Left of) Our Economy

Here’s how badly the latest figures on U.S. economic growth (for the first quarter of this year) have been misunderstood: Even the Trump administration, which has displayed no hesitation to take credit for good economic news even when undeserved, failed to note a big possible silver lining.

As noted in last week’s coverage of these figures on gross domestic product (GDP), the inflation-adjusted growth figure reported by the Commerce Department in its initial read for the first quarter was a measly 0.69 percent. That’s the worst such performance since the 1.19 percent annualized contraction in the first quarter of 2014.

So it’s not entirely surprising that Commerce Secretary Wilbur Ross seized on this discouraging news to emphasize that “We need the President’s tax plan, regulatory relief, trade renegotiations and the unleashing of American energy sector to overcome the dismal economy inherited by the Trump Administration. Business and consumer sentiment is strong, but both must be released from the regulatory and tax shackles constraining economic growth.”

But especially given the rise in sentiment noted by Ross, it’s at least somewhat surprising that he didn’t make more of the strong rise in business spending revealed in the new GDP report. For it lends significant support to President Trump’s claim that his election is already liberated many of the “animal spirits” – i.e., a surge in business optimism – often needed to spur more hiring and especially more corporate spending on new plant and equipment.

For example, in absolute terms, such business spending rose sequentially by 9.1 percent at an annualized rate in the first quarter. That’s the fastest rate since the fourth quarter of 2013, when it jumped by 9.2 percent.

At the same time, back at the end of 2013, the economy expanded at a 3.90 percent real annual rate. In the first quarter of this year, after-inflation growth was only 0.69 percent annualized. So business spending punched far above its weight as a growth engine. As RealityChek regulars know, that’s an encouraging indication that the nation’s growth recipe is becoming more production oriented, and therefore healthier and more sustainable in the long run.

In fact, higher business spending accounted for all of the first quarter’s growth. (Other sectors of the economy contributed to and subtracted from the overall result, too, but their net effect was zero.) As a result, its relative contribution to expansion was its strongest since the first quarter of 2014, when such investment boosted real GDP by 0.84 percentage points but the economy actually contracted at a 1.19 percent annual rate.

And on a standstill basis, business investment in the first quarter represented its highest share of real GDP (13.34 percent) since the third quarter of 2015 (13.48 percent).

Not that one quarter’s results – which will be revised twice more in the next two months alone – are anywhere close to definitive. But the Trump administration had much more to crow about than it seemed to realize.

At the same time, the new GDP data showed that the economy remains way too personal consumption- and housing-heavy – the toxic combination whose bloat so powerfully inflated the bubbles that produced the previous decade’s global financial crisis.

As previously reported on RealityChek, at their pre-crisis peak, in the second quarter of 2005, the combined consumption and housing share of real GDP hit 73.27 percent. The comparable first quarter total was 73 percent even – not much lower. And that share was up slightly from the fourth quarter’s 72.95 percent.

So the United States is still a long way from achieving former President Obama’s goal of creating “an economy that’s built to last.” But from what we know of the first quarter’s growth this year, the economy made some progress that’s worth noting.

P.S. Partial credit for this post goes to CNBC’s Jeff Cox, whose report here first called my attention to the good business spending results.

(What’s Left of) Our Economy: So U.S. Manufacturing’s Never Produced More, Huh?

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Commerce Department, Federal Reserve, gross output, industrial production, inflation-adjusted output, manufacturing, real gross output, real value-added, recession, recovery, value added, {What's Left of) Our Economy

Even though (thankfully) few claims have been heard lately that American domestic manufacturing is either enjoying a renaissance or on the verge of one, it’s still commonplace to insist that the sector’s output is at an all-time high. Invariably, the purpose is to argue that U.S. industry is in perfectly acceptable shape, and that anyone believing the contrary is mistakenly obsessing about the industry’s long years of job losses – which are attributed to its ever faster adoption of labor-saving technologies that are encouragingly boosting productivity.

Let’s (charitably) leave aside the reality that manufacturing’s productivity performance lately has been historically feeble. Instead, let’s express thanks to the Commerce Department, which has just published its latest reminder of how complicated – and uninspiring – manufacturing output has been lately.

As known by RealityChek regulars, the Federal Reserve’s monthly industrial production numbers have made sadly clear that, when adjusted for inflation, American manufacturing output is anything but at an all-time high. Indeed, its peak came at the very end of 2007, just as the Great Recession was beginning according to the quasi-official scorekeepers at the National Bureau of Economic Research. Since then, real manufacturing production has shrunk by 4.43 percent.

But as the Commerce Department’s new quarterly report on gross domestic product (GDP) by industry once again describe in detail, the U.S. government measures manufacturing output in several different ways. Unfortunately, however, none of them tell a story especially flattering to the sector.

Commerce gives pride of place to a gauge called real value-added – which tries to eliminate the double-counting that often marks the simpler production numbers mentioned above. In other words, real value-added (along with value-added that’s not adjusted for inflation) tries to ensure that the government isn’t counting an auto part once when it comes out of a parts factory and again when it comes out of a vehicle factory as one piece of a finished good.

The real value-added data certainly make manufacturing’s recent production growth look better than the real output figures. But that’s not to say they make this performance look good, for they show that from its 2007 peak through the end of last year, domestic manufacturing has shrunk by 0.81 percent.

It’s only when you don’t adjust for inflation that you start getting genuinely encouraging manufacturing output numbers. According to the pre-inflation value-added data, American manufacturing production was indeed at an all-time high as of the end of 2016. In fact, it’s 17.31 percent higher than the 2007 level.

Don’t get too excited by this number, however. If we switch time-frames and just look at the current economic recovery, we see that from the time the economy resumed growing in 2009 (and unfortunately, this data set doesn’t contain quarterly figures, so we have to use full years) through the end of 2016, current dollar manufacturing value-added advanced by 25.97 percent. That’s only a little faster than manufacturing’s 25.42 percent value-added growth during the previous (2001-2007) expansion – which was a year shorter. Moreover, no one ever considered those years a manufacturing golden age – or even close.

Yet another version of the manufacturing story is told by the gross output numbers compiled by the Commerce Department. They show that manufacturing production rose after the last recession began – by 12.94 percent. But that growth ended in 2014. Over the next two years, it dropped back – by 4.41 percent. So record manufacturing output came – and then went.

Adjusting gross output for inflation serves up a less volatile picture of manufacturing production, but it’s not much of an improvement. According to this measure, output peaked in 2007, and since then has dipped by 0.27 percent. That’s not much. But it doesn’t mark 2016 as an all-time high, either.

To me, a reasonable bottom line is this: The U.S. government uses five different measures of manufacturing output. Both its timeliest (the Fed industrial production figures) and arguably the one it likes best (real value-added) show that real manufacturing production is off its recent records. So do two other measures. The only data set that tells a reasonably good story is one that’s doesn’t take inflation into account. That’s a pretty flimsy reed on which to base claims that domestic manufacturing output has never been stronger.

(What’s Left of) Our Economy: Why Trump’s Budget Proposal is a Win for Trade Policy Realism

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border adjustment, budget, Commerce Department, enforcement, exports, imports, Robert Lighthizer, tax reform, Trade, trade law, Trump, U.S. Trade Representative, Wilbur Ross, {What's Left of) Our Economy

Certainly since Donald Trump has been elected president, there’s been a tension even among his most supposedly hawkish trade policy advisers over basic objectives: Should the United States seek to solve its major trade-related problems mainly by promoting exports, or mainly by curbing imports? Of course, the two goals aren’t mutually exclusive. But the first suggests that the nation’s approach to trade will essentially be more of the same (albeit executed more competently), while the latter suggests a significant shift and is vigorously put into effect.

That’s one trade-related reason why Mr. Trump’s new budget proposal is so interesting and potentially important. If you believe that “money talks,” or “deeds count more than words” or any homilies to that effect, then it looks like that the tension has been resolved in favor of import limits – which would be good news indeed if it remains intact.

The reasons, as I’ve long written, are pretty simple, and should be much more obvious than they’ve been. First, for all its problems, the U.S. economy has been growing faster recently than most major world economies. And unlike the faster growers (mainly in the developing world), America’s growth isn’t export-led or -heavy. For that reason alone, its domestic market continues to be the world’s paramount emerging market.

Second, that relatively fast growth, combined with the ongoing export-heavy nature of most foreign economies means, and the huge and chronic American trade deficit, means that the size of the U.S. domestic market into which domestic producers can sell is enormous in absolute terms and indeed much bigger relative to foreign markets than widely realized. After all, this American market includes not only whatever growth the United States can generate going forward, but the large chunks of its market currently controlled by foreign competition.

Third, however much leverage the United States enjoys in global trade, and over foreign countries, its influence over its own market will always be much greater. And that goes double for countries with long records of sweeping protectionism.

Fourth, the domestic market is the market that domestic American producers should know best. Therefore, despite its undeniably impressive dynamism, these domestic producers have less to learn about customer preferences than is the case with foreign market.

For examples of the administration’s apparent ambivalence, simply check out statements made in the confirmation hearings of Commerce Secretary Wilbur Ross and U.S. Trade Representative-designate Robert Lighthizer. Indeed, it’s easy to conclude that their stated bottom line endorses the export-focused approach.

But the new Trump budget document is sending the opposite message – and its declared spending priorities arguably matter more than even sworn testimony. Specifically, according to the Commerce Department section, the final budget

“Strengthens the International Trade Administration’s trade enforcement and compliance functions, including the anti-dumping and countervailing duty investigations, while rescaling the agency’s export promotion and trade analysis activities.”

Not that this text is the end of the story, or even close. As widely recognized, the new budget statement is the first step in a lengthy process in which Congress will be heavily involved. Moreover, because so much of it is so controversial, and because the nation is so far from a consensus on official spending priorities, it’s entirely likely that the current budget priorities will simply wind up being carried over for the time being.

And as for trade policy specifically, Commerce Department funding will be far from the only determinant as to where the administration will put most of its energies. Just one example: the structure of whatever new or revised trade agreements it seeks will matter greatly as well. So will the fate of the border adjustability feature of the House Republican leadership’s tax reform proposals – which would both in effect penalize imports and subsidize exports. Moreover, because the U.S. trade law system is so (inevitably) slow-moving, episodic and reactive, relying exclusively or even mainly on this traditional trade enforcement tool will become a recipe for trade policy failure.    

But the Commerce budget priorities appear to be a straw in the wind that’s unmistakable – and because realistic, unmistakably welcome.

(What’s Left of) Our Economy: Where America Has Literally Been Asleep at the Switch on Trade

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Buy American, Canada, Commerce Department, European Union, free trade agreements, FTAs, government procurement, Government Procurement Agreement, GPA, Japan, Jeff Merkley, NAFTA, North American Free Trade Agreement, Norway, Politico, South Korea, Tammy Baldwin, Trade, Trump, Wilbur Ross, World Trade Organization, WTO, {What's Left of) Our Economy

Here’s a big, sincere shout-out to U.S. Senators Jeff Merkley (Oregon) and Tammy Baldwin (Illinois). Thanks to their insightful curiosity, Americans have just gotten evidence that their country’s trade policy is indeed as much of a disaster area as claimed by President Trump and other critics.

Their accomplishment? The two Democrats asked the Government Accountability Office (GAO) to look into how well Washington has been implementing a more than two-decade-old global trade agreement aimed at opening government procurement markets around the world. Also examined: the trade liberalization record of government procurement provisions of bilateral and regional trade agreements signed by the United States (like the North American Free Trade Agreement, or NAFTA).

The findings were released last month (and alertly reported by Politico‘s trade correspondents), and make clear that the United States has been getting royally shafted. Moreover, these results have been inevitable both because the global deal was so poorly conceived from an American standpoint, and because literally no one in the U.S. trade policy-making apparatus has been tracking the results of either the global agreement or the relevant sections of the narrower trade deals agreement affecting literally trillions of dollars worth of actual and potential sales.

Even worse, the blithe assumption that other signatory countries has been scrupulously abiding by all of these procurement agreements has sharply limited America’s willingness to expand and tighten the Buy American rules that cover its own official purchases – in the process, passing up major opportunities for growth and job creation at a time of economic weakness. And P.S. This includes President Trump.

The GPA is a “plurilateral” agreement negotiated under the auspices of the World Trade Organization. In other words, accession by WTO members is voluntary. Still, the deal, which went into effect in 1996, currently encompasses 47 countries that are now committed to placing foreign enterprises and their own domestic entities on an equal footing when they compete for government contracts. Nine other WTO members are in the process of signing on. Most of America’s bilateral and regional trade agreements also prohibit discrimination in awarding these opportunities for supplying governments with goods and services. Consequently, 19 other countries have promised the United States to open their official procurement markets to the United States in return for America opening its own to them. (All of these governments have carved out various agreed on exemptions. And sub-national governments are covered by these deals as well.)

With stakes this high, you’d think that at some point the U.S. government would display reasonably consistent interest during the multi-decade lives of these trade agreements in whether they’ve been paying off. But according to the GAO researchers, you’d be wrong.

Even though the GPA requires detailed, annual reporting of procurement statistics by signatory governments, the GAO’s

“review of data that the United States and next five largest GPA parties [the European Union, Japan, Canada, South Korea, and Norway] submitted to the WTO for 2008 through 2013 found that a number of parties did not submit the reports annually, the submitted reports did not include all required data, and each party’s reports included inconsistencies that limit the data’s comparability. Further, a lack of common understanding on definitions of key terms has led to inconsistent reporting practices among the GPA parties, and a GPA statistical working group has made little progress in addressing such challenges.”

Some specific failings:

>”although Canada submitted annual notifications with central government procurement data for 2008 through 2013, the notifications did not include data on procurement by subcentral governments or by other government entities”;

>”Japan’s annual notifications have not included procurement by entities such as utilities and state-owned enterprises that are covered by the GPA”:

>”South Korea has not submitted notifications for any year except 2010, and Japan has not submitted a notification for 2012 although it did so for other years through 2013.”

>”Of the U.S. FTAs [free trade agreements] we reviewed, only NAFTA requires its parties to report annual statistics on government procurement; however, the last data exchange between the three NAFTA parties took place in 2005. As a result, information about the extent to which U.S. FTA partner governments open procurement to U.S. suppliers is not available.” [Emphasis added.]

The United States has been far from a whiz in reporting, either. But its failings have been much less excusable given all the evidence provided by the GAO showing that it’s opened its procurement markets much wider than any other GPA or FTA signatory. Despite the above data limitations, the GAO nonetheless felt confident in concluding that for 2010, “[T]he United States reported more than twice as much GPA-covered government procurement as the next five largest GPA parties combined, although total U.S. government procurement is less than the combined total for the other five parties.”

In money terms, the value of contracts opened to non-discriminatory bidding by the United States at all levels of government was $837 billion. The value of contracts opened by those five non-U.S. GPA parties that promised to liberalize the most in absolute terms was some $381 billion. Yet total government procurement in the United States that year was some $1.7 trillion, the GAO estimates. For the other five GPA signatories, it was much larger – $4.4 trillion.

Moreover, because of the aforementioned reporting failures, it’s not possible at all for the U.S. government, or the American people, to gauge procurement liberalization under free trade agreements – with the exception of Canada. But when their procurement budgets are added in, and duplication eliminated (e.g., for Canada), the total market that should be available to American business and workers at least in principle is $4.4 trillion. 

The GAO doesn’t conclude that U.S. trade partners are simply capitalizing on Washington’s indifference to flout their treat obligations. In fact, in one instance, it even tries to get them partly off the hook: “Many EU member states, as well as Japan and South Korea, have actual government expenditures smaller than the United States’ and are therefore likely to have more smaller-value individual procurement contracts that fall below the GPA threshold levels.” (Decisions on the smallest government contracts typically are one of the main GPA and FTA procurement carve-outs.)

But if so many foreign government contracts are too small to be opened for non-discriminatory bidding, then obviously these trade deals are too poorly structured to give American producers anything remotely like reciprocity. And more important, Washington so far has had no way of knowing judging by any measures whether non-discrimination in principle is being translated into non-discrimination in fact .

As Mr. Trump’s Commerce Secretary, Wilbur Ross, recently noted, “There’s not a lot of point making trade deals if you don’t enforce them.” He could have added that such enforcement is impossible without seeking and obtaining reliable data on results. Donald Trump’s predecessors have flunked these two crucial tests of American trade policy-making. Until he gets strong evidence to the contrary, it’s time for the president to take the logical next step, assume that the GPA and the FTA government procurement measures have been serious mistakes, and ignore them as thoroughly as America’s competitors evidently have.

Making News: Thom Hartmann Interview on Trump and Trade Now On-Line

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China, Commerce Department, Making News, NAFTA, National Trade Council, North American Free Trade Agreement, Peter Navarro, Robert Lighthizer, RT America, The Big Picture with Thom Hartmann, Thom Hartmann, Trade, U.S. Trade Representative, Wilbur Ross

I’m pleased to announce that the video of my appearance last night on RT America’s The Big Picture with Thom Hartmann is on-line!  Click on this link to hear in full a great discussion of President-elect Trump’s plans for U.S. trade policy and how they promise to shake up American politics.  The segment starts at about the 15:30 mark.

And keep checking back in with RealityChek for news of upcoming media appearances and other developments.

 

(What’s Left of) Our Economy: Which States are the Biggest Economic Growth Winners and Losers?

Tags

Commerce Department, GDP, Great Recession, gross domestic product, growth, inflation-adjusted growth, per capita GDP, {What's Left of) Our Economy

Last Friday, I reported that the government’s new figures on state-by-state economic growth came out, and focused on what they told us about how manufacturing’s been faring. (Reminder: Not well.) If you’re curious about how your state’s been doing lately in terms of economic output and growth, this Wall Street Journal post on the Commerce Department numbers makes it easy.

Today, I’d like to focus on what’s arguably a more important measure of economic health – gross domestic product (GDP) per capita. These figures divide a state’s total production of goods and services by its population, and they give us a better idea both of (a) whether the economy of a state looks big because its residents are adept at creating wealth, or simply because there are lots of them; and (b) whether they’re creating wealth fast enough to keep up with (and in principle share among) their headcounts.

That last sentence hints at something that the GDP per capita statistics can’t tell us – whether state-level of national wealth is actually being shared relatively evenly. But there’s no doubt that states whose pies of output are growing faster than their populations will have more overall wealth to share and easier political choices regarding various sharing ideas.

These new data reveal a GDP per capita (PCGDP) champ that may surprise many: the government-dominated District of Columbia. With inflation-adjusted output per head of more than $160,000 in 2015, D.C. was also Number One (by far) the year the last recession started (2007) and the year it ended (2009). The two runners-up for 2015 are probably less surprising: Alaska ($66,835) and North Dakota ($66,507). Of course, they’re small-population states with huge deposits of fossil fuels – which means their 2016 performance will be weaker.

Rounding out the Top Ten: Connecticut ($64,115), New York ($63,929), Delaware ($63,463), Massachusetts ($62,918), Wyoming, ($60,231), New Jersey ($56,721), California ($56,365), and Washington ($55,403). Aside from energy-rich Wyoming, these PCGDP leaders are in the Northeast and on the West Coast.

The U.S. national figure in 2015? $49,844 in real terms. So that reveals that some states at least are major PCGDP laggards.

America’s poorest state, by this yardstick, is Mississippi, with a 2015 PCGDP of only $31,894. Next, in ascending order, are Idaho ($35,505), South Carolina ($36,174), West Virginia ($36,486), Alabama ($37,597), Arkansas ($37,644), Maine ($37,958), Arizona ($38,244), and Florida ($38,950). The common theme here, of course? Deep South and Sunbelt.

But maybe the trends over time are markedly different from the picture portrayed in this snapshot? Let’s examine the start of the recession (2007) through 2015. Interestingly, high-PCGDP state North Dakota was by far the fastest grower – with its real output per head surging by nearly 51 percent. Way behind in the second slot was another energy producer, Oklahoma (11.45 percent), followed by agricultural power Nebraska (10.19 percent).

Rounding out the fast-growing Top Ten are West Virginia (one of the poorest states, but a 9.82 percent grower), high PCGDP Texas ($53,707 in 2015, with 9.45 percent 2007-15 growth), South Dakota (8.50 percent), Pennsylvania (whose problems I highlighted last week but that nonetheless clocked in at 6.79 percent), Oregon (6.68 percent), New York (6.03 percent), and Minnesota (5.75 percent).

As with stand-still PCGDP, however, overall U.S. PCGDP growth of only 1.46 percent during this 2007-2015 period signals that output per head fell during this period in many states. Nowhere was the plunge bigger than in Nevada (16.71 percent), Arizona (13.47 percent), and Florida (10.92 percent) – all hammered by the housing crisis. Revealingly, all are also fairly low PCGDP states.

Next came even lower PCGDP state Mississippi (-10.18 percent), high PCGDP states Wyoming (a big coal producer, at -9.31 percent) and Connecticut (8.09 percent), PCGDP laggard Idaho (5.66 percent), Georgia (another PCGDP laggard that was a prime housing bubble victim as well, at -5.38 percent), low-PCGDP state South Carolina (-4.60 percent), and much wealthier Delaware (-3.89 percent).

These fast-grower and fast-decliner PCGDP lists in particular strongly indicate that the U.S. economic recovery is getting more uneven geographically. The biggest question they raise, however, could well be political: Are these economic conditions providing many clues as to how these prospering and struggling states’ Electoral College votes will turn out in November? As soon as we have the data, you’ll be able to see them on RealityChek!

(What’s Left of) Our Economy: The Most Encouraging Manufacturing Data are Lagging Indicators

Tags

Commerce Department, Federal Reserve, GDP-by-industry, inflation-adjusted growth, manufacturing, value added, {What's Left of) Our Economy

Let’s close the work week with a surprisingly good piece of news about the manufacturing sector. The Commerce Department released figures yesterday indicating that, by one key measure, it had a knock-out third quarter of last year – at least by recent standards. Unfortunately, there’s a catch.  These figures describe developments that may already be out of date.

The new figures were contained in Commerce’s GDP (gross domestic product)-by-industry report, which isn’t all that closely watched by investors in particular because it comes out with a substantial time lag. That’s why yesterday’s report only took the story up to last September.

At the same time, the manufacturing results were impressive. The most important looked at a gauge called “real value-added” – which as I’ve explained before, tries to eliminate the kind of double-counting that takes place when, for example, an auto part is recorded as output when it gets shipped from the factory, and then gets recorded again as a piece of the finished vehicle.

The findings: From last June through last September, domestic manufacturing grew by an inflation-adjusted 2.6 percent at an annual rate. That’s the best such performance by far since the second quarter of 2014. And even though the actual quarterly growth rate of 0.65 percent in real terms sounds much less impressive (2.6 divided by four), progress is progress.

As RealityChek readers know, there’s another government measure of manufacturing output that’s widely followed – the Federal Reserve’s real production figures – and they’re issued with just a one month lag. These more recent figures are subject to the double-counting problem, but they roughly track the value-added numbers. And their fourth quarter real growth of 0.2 percent represented a significant slowing from the third quarter’s 0.8 percent rate. In fact, unless production doesn’t pick up in January, manufacturing will have stumbled into a technical recession (net shrinkage over two straight quarters).

The Fed figures will be revised of course, but if form holds, value-added growth looks set to decelerate, too. That is, as with wage inflation, if you’re looking for a rebound in manufacturing production, you may already have missed it.