Have America's Most Crippled Regions Begun to Recover?

The Bureau of Economic Analysis released its data on GDP growth by state for 2011. One of the trends the data show are that many of the states most badly hurt by the recession have recovered more sharply than other states. It is hard to say whether the trend is because their gross domestic products dropped so far that a modest recovery is meaningless or whether a genuine, sustainable recovery took hold. An answer to those questions will take a year or more of information to confirm one way or another. But 2011 GDP information is encouraging for several states.

One of the states most brutally battered by the downturn was Michigan. The state lost tens of thousands of jobs in the car industry. Some of those jobs returned last year. Miraculously, unemployment in April in Michigan was 8.3%, or about the national average. Not all of that can be from the auto industry. Some number of service jobs must have emerged in the state. Its GDP growth rate was 2.3% last year, well above the U.S. average. The improvement may have been luck, but it also might be the result of aggressive programs created by the state to attract and retain business. If anyone knew for certain what happened, Michigan could be a template for state recoveries.

Another state that recovered well was Oregon, which has an economy made up of an odd mix of industries — mostly agriculture, forestry and fisheries. No one industry or company dominates its economic base. No one corporation affects its fortune the way that General Motors (NYSE: GM) or Ford (NYSE: F) do in Michigan. Yet, the state’s unemployment rate in April was 8.5%. Its GDP improvement last year was 4.7%, near the top of all states.

Another state recovery that is a mystery is that of West Virginia, one of the poorest states and one in which education attainment is particularly low. GDP rose 4.5% there last year. It would be easy to write that off as a recovery from a very low base, but unemployment in West Virgina is among the lowest in the U.S. — 6.7% in April. Demand for coal, a cheap form of energy, probably helped the West Virginia economy recover.

It is too bad there is no evident common thread among the three states. That would, at least, offer a map to how strong improvements in GDP proceed. But that thread does not seem to exist, unless it is well buried.

Douglas A. McIntyre