Filed under: Forecasts, Bad news, Economic data, Housing, Recession
The United States is an enormous, diverse nation, and there’s perhaps no better evidence of that than the U.S.’s current economic cycle.
The finances of many says have deteriorated to such a degree that they appear to be in recession, although the nation as a whole may not be, a survey of 50 say fiscal directors concluded.
The states: budget deficits abound
The National Conference of Say Legislatures’ survey states that “arguing whether the national economy is in recession is nearly beside the point” because the fiscal condition of some states has declined so much that they appear to be in a recession.
In all, 23 says, including hard-hit housing slump states Florida, California, and Nevada, expect to report budget deficits in the next fiscal year, fiscal 2009, with the aggregate revenue shortfall reaching $26 billion. Further, more than two-thirds of the says stated they are concerned or pessimistic regarding their F2009 revenue outlook.
Historically, most says experience a decline in revenue as the U.S. economy contracts, as the economic slowdown results in lower retail sales, which lowers sales tax revenue — a major source of revenue for many states. Job layoffs also decrease state income tax revenue. Further, state social service costs typically increase, as unemployment claims increase and applications for income/food/energy assistance rise.
Florida, California hard hit
Economist Peter Dawson told BloggingStocks Friday the NCSL data is in-line with the profile of this cycle’s economic slowdown. “From the research we can see that the states under most stress are those that rank very high regarding mortgage default and housing foreclosure lists, with Florida and California being the most obvious examples,” Dawson said. “These says are going to be under fiscal stress for a considerable period of time due to the size of their housing correction.”
Moreover, Dawson said because of California’s and Florida’s size, “it will be very hard for the nation to grow at capacity until these states have started to grow.” Hence, a return to robust economic conditions nationally, “could be a year to 18 months off, assuming growth resumes nationally by late 2008,” he stated.
Bright spots: Texas, Oklahoma
The NCSL stated there was one bright spot concerning the say fiscal survey: economic conditions in oil- producing/energy services states: Texas, Oklahoma and Alaska.
For energy-producing says, the fiscal situation is strong and the outlook is good, the NCSL stated, particularly for those states pumping oil at record-high, plus-$100 oil prices.
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