States differ significantly in how hard they are hit by recession: A letter from Arizona

June 2, 3:49 PMEconomic Policy ExaminerJoseph Hight

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Feb. 17, 2009 file photo, a foreclosure sign sits outside a home for sale in Phoenix. Arizona has one of the highest foreclosure rates in the country. (AP Photo/Ross D. Franklin, File)  

A letter from a colleague, economist Walter Miklius, who now lives in Arizona, reminds me of how hard the recession has hit some areas of the country relative to others. For example, Virginia and Maryland get much benefit form the presence of the federal government work force and a large military presence in and around Washington, DC. So Virginia and Maryland residents don’t feel the effects of the recession as acutely as residents in Michigan and California, to name a couple of the hardest hit states.

According to the latest Bureau of Labor Statistics release on regional and state unemployment, in April there were eight states with unemployment rates above ten percent.

At the other end of the spectrum, there were seven states with April unemployment rates of less than six percent.

Virginia and Maryland each had April unemployment rates of 6.8 percent.

Arizona’s April unemployment rate was 7.7 percent. 

But that is only a number. Here is what Miklius wrote about what he observes in Arizona. It is far more descriptive and gives those living in areas less stressed by the recession a feel for what it is like elsewhere (letter postmarked Phoenix, 26 May 2009).

“We drove to Phoenix, which we have not done for a while, and I was surprised to see so many “for lease” signs. A lot of firms must have thrown in the towel, including the store where I bought my piano.

I also had a chance to talk to a couple of business friends and a colleague from ASU [Arizona State University]. The consensus of the opinions is that there is nothing on the horizon to be optimistic about.

All large development projects have been cancelled. Recently, a number of Chrysler and GM dealers lost their dealerships. Even the large supermarket chains are closing ‘underperforming stores.’

The tourism industry barely survived a miserable peak season and expects even a worse off-season. In the off-season they were depending on business conferences, a market segment that has pretty much disappeared. The tourism industry elsewhere is in equally bad shape. In the last Sunday’s paper there was an ad of a Las Vegas hotel offering $19 room rates and 99 cent restaurant meals. Cheaper than staying home!

Non-profits are even in worse shape. The ‘meals-on-wheels’ … are cutting down on deliveries.

In Phoenix about 60,000 jobs are in the defense industry. If Gates [Secretary of Defense Robert Gates] is serious in cutting defense spending it will be another disaster.

The state’s deficit this year is 3 billion and is expected to be much larger next year. Of course, Arizona is not a disaster of the same magnitude as California.

Nowhere in sight is there any trace of stimulus effects. …

In conclusion, the situation is serious.”

In a report on May 22 the Arizona Republic adds to the description of woe in the Phoenix area,

The Greater Phoenix Blue Chip Forecast, a panel of economy experts, estimates jobs will fall 5 percent this year and 1 percent in 2010 - on top of a 2.4 percent dip in 2008, said Lee McPheters, director of the JPMorgan Chase Economic Outlook Center at Arizona State University.

That's a loss of about 45,000 jobs for 2008, 90,000 this year and 20,000 in 2010 - a total of about 155,000. "We have the worst large labor market in the country (out of metro areas with at least 1 million workers)," McPheters said. "We are even weaker than Detroit."

We welcome comments and observations from readers about how the recession is affecting their state and local areas.  We would of course like to hear about signs of rebound, but if all you got is woe to tell, let's hear it.