States in recession and state economic policy

Most observers labeled Michigan’s economy from 2000-2007 as a single state recession. And interpreted it as caused primarily by state policy. In our reports Don Grimes and I labeled it a single industry recession. That the root cause of Michigan’s so-called lost decade was not policy, but the collapse of its dominant industry–motor vehicles. Michigan’s economic ups and downs are very aligned with the health of the domestic auto industry irrespective of which political party is in control of either Washington or Lansing.

Business Week just published an article entitled the U.S.States Where Recession is Already a Reality based on analysis from Moody Analytics. Alaska, North Dakota, West Virginia and Wyoming are listed as in recession. And Louisiana, New Mexico and Oklahoma are listed as at risk for a recession. Why these states? Business Week writes:

Even as U.S. employers added 2.7 million workers in 2015, job cuts last year totaled 18,800 in North Dakota, 11,800 in West Virginia and 6,400 in Wyoming, according to the U.S. Labor Department. The common thread? They all have concentrations of energy companies. A 72 percent plunge in crude oil prices since a peak in June 2014 has led to lower production and firings.

When Michigan’s dominant industry was collapsing we were told repeatedly that it was because Michigan was hostile to business. Its hard to list the states currently in recession while the country continues to expand as being hostile to business. The conservative American Legislative Exchange Council in their 2016 Rich States, Poor States report ranks North Dakota 2nd, Wyoming 8th, Alaska 14th, Oklahoma 16th, Louisiana 26th, New Mexico 34th and West Virginia 36th.

In their article Business Week reports that California was the state with the largest job creation in 2015. Rich States, Poor States ranks California 44th.

So no Michigan’s lost decade was not primarily caused by state economic policy. Anymore than the current downturn in North Dakota, Wyoming and Alaska are caused by their adherence to the so-called business friendly policies we have been told repeatedly are the key to Michigan’s economic success.


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