The State of Economy in the Swing States

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I was living in Pennsylvania, voting in my second presidential election when my mom asked me that question in the months leading up to Ronald Reagan’s defeat of Jimmy Carter: “Are you better off today than you were four years ago?” Four-year-ago comparisons are tricky when the worst financial collapse in my lifetime occurred four years ago. Comparing the swing states not to their conditions four years ago, but how they might feel compared to the rest of the nation, Virginia, Colorado and New Hampshire appear to be “better off” than the average American. But in North Carolina, Florida and Pennsylvania, prices for the basic necessities are above the national average while median incomes are lagging. If consumer confidence translates into voter confidence, then the elections in some of the key swing states will belong to the Republicans in 2012.

Conditions as Percent of National Averages

Contested State

Dozen Eggs

Gasoline

Utilities

Income

Unemployment

NC

110%

100%

100%

85%

116%

FL

114%

101%

126%

85%

106%

PA

117%

101%

97%

98%

95%

CO

103%

97%

84%

118%

100%

NV

90%

104%

54%

105%

145%

VA

101%

99%

96%

121%

71%

NH

78%

95%

87%

131%

65%

OH

78%

97%

126%

92%

87%

WI

69%

108%

89%

101%

88%

IA

61%

80%

94%

100%

64%

Prices for eggs, gasoline and utilities from www.numbeo.com. Unemployment rates from www.bea.gov. Median income from www.census.gov. Percent of national average calculated by author.  Contested states from www.brookings.edu.

A presidential election year may be a bumper season for political professionals, but it’s also a time of worry for voters. In the months leading up to the 2000 election, we were wondering how long we could ride the upside of prosperity while the Federal Reserve was busy raising interest rates designed to keep inflation in check. Eighteen months before the 2004 election, tax cuts were battling with the cost of the Iraq war in the federal budget, unemployment was up and consumer confidence was at a 10-year low with stocks headed for their third straight annual decline. A Republican - in fact the same Republican - became president both times.

Eighteen months before the 2008 election, the overall economy was very mixed according to a Federal Reserve Board report based on data collected from their twelve district banks. Economic activity through the summer was slowing down in five regions, while the other seven reported relatively steady – though not really growing – economic activity. That summer, with the election looming, most people were worried about inflation.

Discussions of labor shortages showed up in the Federal Reserve reports before the 2008 election from some of the swing states –  states with a large number of unaffiliated voters-like Ohio (shortages in truck drivers), Wisconsin and Iowa (shortages in skilled manufacturing workers and engineers). Pennsylvania reported tight labor markets for both skilled and unskilled workers, suggesting that wages would rise in 2009 while prices were expected to hold steady – a sure way for consumers to feel prosperous. The onset of the financial crisis in September turned all that into a fantasy.

The party that controlled the White House during the collapse got the blame – Democrats retained the control over the House of Representatives that they won in 2006, no incumbent Democratic senators lost their seats and a Democrat was elected to the White House in 2008. In the 2010 mid-term elections, Democrats retained control over the Senate despite the largest gains by the Republican Party since 1994, yet lost their majority in the House of Representatives. The House has constitutional responsibility for federal spending; a federal budget has not passed on time (meaning there were no threatened shut-downs of the federal government) since 2007. Neither Democrats nor Republicans in the House are doing the job we pay them for – hence, their current new-record-low well-deserved 12% approval.

This time around, Wall Street has all of the Washington Democrats cheering for a rally. New Geography reader NellyHills put it succinctly (08/26/2012 comment on The Next Public Debt Crisis Has Arrived): “Unfortunately at this point we have 2 choices which are both bad: Continue to believe live with the inflation…, or, Pop the bubble and all suffer through a 10 to 20 year depression. Either way, the middle class loses.” Regular New Geograpphy readers know that having a choice of candidates does not always mean having a good choice. But presidential elections are not won at the national level – they are won in the states, thanks to the Electoral College process of assigning votes. Jobs are a subject every voter understands: Either you have one or you don't. Again, some of the swing states are really not feeling it while a few – notably Iowa, New Hampshire and Virginia – are doing better than the rest of the nation.

Contested State

Unemployment as percent of national rate

NV

145%

NC

116%

FL

106%

CO

100%

PA

95%

WI

88%

OH

87%

VA

71%

NH

65%

IA

64%

Unemployment rates from www.bea.gov. Percent of national average calculated by author.  Contested states from www.brookings.edu.

Reviewing more recent Federal Reserve Board reports, it is clear that the uncertainty about U.S. fiscal policy and weak demand from consumers are being blamed for the conservative approach to hiring by most employers.

District

Contested States

Jobs

Wages

Atlanta

FL

Flat to up slightly except in discount retailers where hiring is up significantly

Positive growth, especially for highly skilled*

Boston

NH

Mostly flat, but without layoffs

(No comment provided)

Chicago

IA, WI

Flat to up slightly

Flat except for highly skilled*

Cleveland

OH + Pgh PA

Little hiring except highly skilled

Flat

Philadelphia

PA Ex Pgh

Up slightly

Steady to falling

Kansas City

CO

Flat

Flat except for highly skilled*

Richmond

VA, NC

Temp-to-permanent transitions rising though demand for labor continues to weaken except in highly skilled

Some widespread gains in wages.

San Francisco

NV

High unemployment and tepid hiring except in highly skilled

Limited upward pressure (mainly from cost of benefits)

*Highly skilled workers include information technology, health care, transportation and some profession services, plus certain manufacturing jobs. Source: Federal Reserve Board Beige Book, July 2012

Once voters have a source of income, the next concern has to be prices -- Reagan’s exact words were “Is it easier for you to go and buy things in the store?” Despite lower input prices, consumer product prices are creeping higher across most of the nation.

District

Contested States

Input Prices

Consumer Prices

Atlanta

FL

Lower energy prices, slightly higher input prices with expectation of future decline

Higher (based on increased sales in discount stores).

Boston

NH

Steady, but sluggish production

Steady to slightly higher

Chicago

IA, WI

Lower energy prices, lower retail and wholesale prices for cotton, lower steel and scrap metal prices.

Food prices expected to rise as crop production deteriorates. Weak response to “sale” promotions.

Cleveland

OH + Pgh PA

Steel and scrap metal price rises easing, some off-shore labor costs rising

Steady

Kansas City

CO

Steel and scrap metal price rises easing, increases in the cost of building supply materials

Steady

Philadelphia

PA Ex Pgh

Increases in the cost of building supply materials; otherwise, falling prices.

Generally falling price levels. Limited ability to pass price increases to homebuyers.

Richmond

VA, NC

Lower prices for cotton to retailers and manufacturers, increases in the cost of building supply materials

Price increases passed on to homebuyers

San Francisco

NV

Declining prices for raw materials and energy

Upward pressure easing somewhat

Source: Federal Reserve Board Beige Book, July 2012

Back in 2000, Alan Greenspan’s Federal Reserve raised interest rates one time too many, Al Gore won the popular vote, George Bush became president and by March of 2001 we were in recession. In 2008, Bernanke considered making changes to the Fed's policy to stop all the guessing and swooning that the markets do over Federal Reserve interest-rate changes by making a target known. Credit markets froze solid, Wall Street got bailed out in September, Barack Obama was elected in November. The Wall Street Reform Act passed in 2009 has yet to be enacted in any significant way. Changes in monetary policy – along with double-dip recessions and other economic problems overseas – have so far offset any predicted decline in the dollar that would result in measurable inflation. But that doesn’t matter if you are in Pennsylvania, Florida or North Carolina and struggling to put a roof over your head and food on the table.

Susanne Trimbath, Ph.D. is CEO and Chief Economist of STP Advisory Services. Dr. Trimbath’s credits include appearances on national television and radio programs and the Emmy® Award nominated Bloomberg report Phantom Shares. She appears in four documentaries on the financial crisis, including Stock Shock: the Rise of Sirius XM and Collapse of Wall Street Ethics and the newly released Wall Street Conspiracy. Dr. Trimbath was formerly Senior Research Economist at the Milken Institute. She served as Senior Advisor on United States Agency for International Development capital markets projects in Russia, Romania and Ukraine. Dr. Trimbath teaches graduate and undergraduate finance and economics.

States map image by Bigstock.



















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