Although the United States as a whole feels the pain of this most recent recession, the sting varies from region to region. Variances can be explained by the different industries within these areas, among other factors.

Brye Steeves

English

Research Papers in Economics

10 FALL 2009 • TEN
A
lthough  the  United  States  as  a 
whole feels the pain of this most 
recent recession, the sting varies 
from region to region.
“There are some exceptions, but the same 
regions  typically  suffer  longer  and  deeper 
recessions,”  says  economist  Chad Wilkerson. 
“Other  regions  not  only  fare  better  during 
recessions, but often have stronger recoveries 
from the downturn.”
Wilkerson, who is the Branch executive of 
the Oklahoma City office of the Federal Reserve 
Bank of Kansas City, recently researched the 
economic performance of the 12 Districts of 
the Federal Reserve System during the most 
recent recession, as well as the previous eight 
recessions. The Districts divide the country by 
geographic  region;  each  has  its  own  Federal 
Reserve headquarters, such as the Kansas City 
Reserve Bank in the Midwest, as shown above.
“These historical patterns,” he says, “may 
offer insight to the shape of this recession, and, 
ultimately, the nation’s recovery.”
Wilkerson’s research shows the recession so 
far, while deep, has been fairly typical for many 
parts of the country, especially the Northeast 
and Midwest. For other regions, such as the 
Southeast and West, the downturn is clearly 
the worst in the past 50 years. Many of the 
differences  among  regions  can  be  explained 
by the different industries within these areas,   
he says. 
“These  regional  variations  during 
recessions can largely be explained by industrial 
structure or by other special factors, such as 
overextended real estate sectors.”
Here’s a look at how the regions compare 
today and historically.
history shows regional patterns, offers insight for recovery
San Francisco
Dallas
Kansas City
Boston
New York
Richmond
Minneapolis
Chicago Cleveland
St. Louis
Atlanta
Philadelphia
12 District headquarters  
of the Federal Reserve SystemTiming of entrance
Wilkerson analyzed quarterly employment 
data to identify regional business cycle peaks 
and downturns. This shows the U.S. economy 
entering  into  recession  at  the  beginning  of 
2008.  Regionally,  though,  some  Districts 
began  their  descent  earlier  in  2007,  while 
others stayed strong well into the second half 
of 2008.
By  early  2009,  all  12  Federal  Reserve 
regions had entered the most recent recession. 
The  Atlanta  District  was  the  first,  followed 
by the Cleveland and Chicago Districts. The 
Kansas City and Dallas Districts entered last. 
During the previous eight recessions, most 
Districts entered downturns at a different time 
than the nation. So it is not surprising that some 
Districts have performed much differently than 
others or the nation as a whole, Wilkerson says.
Particularly early or late entrances into the 
most recent recession can be linked to Districts’ 
key industries, Wilkerson says. For example, 
the housing crisis began earlier and was deeper 
in Atlanta’s District than any of the other 11 
Districts,  significantly  reducing  construction 
jobs  there.  The  Cleveland  and  Chicago 
Districts  have  been  hit  hard  by  declines  in 
manufacturing, which is heavily concentrated 
in  those  regions.  However,  sizable  farm  and 
energy  sectors—and  their  high  commodity 
prices—in the Kansas City and Dallas Districts 
benefited  those  economies  during  a  good 
portion of the national downturn.
Kansas city fed creates  
financial stress index
 
 
The U.S. economy is under significant  
financial stress. 
 
“This stress has contributed to the downturn 
in the economy by boosting the cost of 
credit and making businesses, households, 
and financial institutions highly cautious,” 
says Craig Hakkio, senior vice president 
and special economic advisor at the Federal 
Reserve Bank of Kansas City. 
Hakkio and Bill Keeton, assistant vice presi-
dent and economist, recently researched 
financial stress, including what it is, how it 
can be measured and why it matters. Their 
research also includes a new index of finan-
cial stress, the Kansas City Financial  
Stress Index.
“As financial conditions begin to improve, 
the various measures of financial stress that 
the Federal Reserve monitors may give 
mixed signals, and policymakers would 
benefit from a comprehensive index of finan-
cial stress,” Keeton says. “This could also 
prove valuable down the road if the Federal 
Reserve needs to decide whether financial 
stress warranted special action.”
Read Hakkio and Keeton’s research  
“Financial stress: What is it, how can it be 
measured and why does it matter?” at 
KansasCityfed.org/TEN.
Boston
New York
Philadelphia
P
h
o
t
o
 
b
y
 
G
a
r
y
 
b
a
r
b
e
rsame quarter similar to  
the nation
educational 
services; finance 
and insurance; 
health care and 
social assistance
2 early in
1 late in
3 late out
1 early out
 
later
weaker than 
the nation
educational 
services; 
entertainment; 
wholesale trade
3 early in
0 late in
3 late out
0 early out
later weaker than 
the nation
educational 
services; utilities; 
manufacturing
7 early in
1 late in
4 late out
0 early out
earlier
weaker than 
the nation
manufacturing; 
management; 
health care and 
social assistance
6 early in
0 late in
3 late out
1 early out
12 federal 
Reserve districts
(listed by 
headquarters city)
Timing of entry 
into most recent 
recession 
compared to U.S.
Historical job 
growth during 
recoveries and 
expansions
Some defining 
industries of 
the District
Entry for past 
8 recessions 
compared to U.S.
Exit from past 
8 recessions 
compared to U.S.
 
same quarter stronger than 
the nation
federal 
government 
(civilian); military; 
construction
3 early in
0 late in
0 late out
1 early out
 
earlier stronger than 
the nation
administrative 
and waste 
services; forestry 
and fishing; 
entertainment
0 early in
1 late in
0 late out
4 early out
earlier
weaker than 
the nation
manufacturing; 
farming
6 early in
0 late in
1 late out
1 early out
same quarter
similar to the 
nation
farming; 
transportation; 
forestry and 
fishing
5 early in
1 late in
1 late out
2 early out
later similar to the 
nation
farming; utilities; 
health care and 
social assistance
2 early in
3 late in
2 late out
1 early out
later
similar to the 
nation
mining; farming; 
military
0 early in
6 late in
1 late out
5 early out
later
stronger than 
the nation
 mining; farming; 
construction
0 early in
5 late in
2 late out
3 early out
same quarter stronger than 
the nation
forestry 
and fishing; 
real estate; 
accommodation 
and food services
0 early in
2 late in
1 late out
2 early out
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Regional Comparison13 FALL 2009 • TEN
Historically, mining has fared better than 
other industries in the early stages of a recession 
when  energy  prices  often  are  temporarily 
high—much  like  when  gas  prices  peaked 
at  more  than  $4  per  gallon  in  the  summer 
of  ’08.  Manufacturing  has  typically  entered 
recessions earlier than other industries, while 
the education and health care industries have 
fared better.
Depth
Nationwide, more than two-thirds of the 
jobs created since the 2001 recession have been 
lost. By summer, the national unemployment 
rate reached 9.5 percent with many analysts 
predicting it hitting double digits before long.
The Atlanta, San Francisco, Cleveland and 
Chicago Districts have seen the steepest declines 
in  employment.  In  contrast,  employment  in 
the Kansas City and Dallas Districts in early 
2009 still was higher than a few years ago.
The same Districts tend to underperform 
(Cleveland  and  Chicago)  and  outperform 
(Kansas  City  and  Dallas)  the  nation  in 
recessions. This suggests similar factors, such 
as a District’s industries, may contribute to the 
timing and depth of recessions, Wilkerson says.
“These defining industries are what make 
a region’s economy most different from that 
of  the  nation  as  a  whole,”  Wilkerson  says. 
“Additionally,  industries  that  are  heavily 
concentrated in a particular District, whether 
it is oil in the Southwest or manufacturing in 
the upper Midwest, play a significant role in 
employment variation.”
A few Districts have experienced recessions 
when the nation hasn’t, which is usually related 
to declines in their defining industries, such as 
the agricultural or automobile sectors.
Recovery
“Regions tend to recover more uniformly 
from deep recessions than from milder ones, 
so  we  may  see  somewhat  of  a  simultaneous 
recovery  nationwide,”  Wilkerson  says.  “Still, 
based  on  historical  precedents, 
some  regions  might  recover 
more  quickly,  based  on 
migration  patterns  or  industry 
concentration.”
Historically,  the  strongest 
growth  during  recoveries 
has  occurred  in  the  West 
and  South,  where  the 
U.S  population  has  been 
migrating.  Regions  with 
concentrations  of  high-
skilled  workers,  such  as 
in  the  Northwest,  Mid-
Atlantic  and  Mountain 
West, also have promising 
prospects for recovery.
However,  some 
regional  differences  in 
this  recession,  such 
as  housing  markets  in  the 
Atlanta  and  San  Francisco  Districts,  could 
affect the timing of recovery.
“The  country’s  most  recent  recession, 
although  painful,  has  been  fairly  typical  for 
some  regions,”  Wilkerson  says.  “This  might 
mean  these  regions’  recoveries  will  resemble 
those from past deep recessions, although the 
reported  permanency  of  many  recent  layoffs 
could continue to dampen job growth in the 
near term.”
f u R T h E R   R E S O u R C E S
“RECESSioN aNd RECoVERY aCRoSS ThE 
NaTioN: lESSoNS fRoM hiSToRY”
By Chad R. Wilkerson
KansasCityFed.org/TEN
BY BRYE STEEVES, SENIOR WRITER
T
CoMMENTS/QuESTioNS are welcome 
and should be sent to teneditors@kc.frb.org.

Recession by region: history shows regional patterns, offers insight for recovery

http://www.kansascityfed.org/publicat/TEN/pdf/Fall2009/recession.pdf

Recession by region: history shows regional patterns, offers insight for recovery

Abstract

Similar works

Full text

Available Versions

Research Papers in Economics