Economic Recovery Varies by Region

Consumer spending has not recovered evenly throughout the country, as the dominant industries in each region experience recovery at different stages of the business cycle.

A year ago, the Southeast region, with a relatively large consumer staples industry, was growing the fastest. Six months ago, the fastest growth was in the Northeast and Pacific regions, dominated by consumer durable goods. Later this year, the Midwestern capital goods region will boast the fastest growth.

There are three dimensions to differences in regional economic growth. Variation stemming from the industry mix in each region gets the most attention. In this up-cycle, New England and Southern California have the strongest cyclical recovery so far. But non-cyclical growth differences due to variation in net in-migration are significant, boosting growth in California, Texas, and Florida by 2% to 3% a year. Lastly, not every region achieves potential growth. Compared to the plains states, California has about 4% of unachieved potential that could be regained with better economic management.