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Five Years After The Financial Crisis, Few States Have Regained Lost Ground

By Alan Pyke  

"Five Years After The Financial Crisis, Few States Have Regained Lost Ground"

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Just 13 states have returned to the level of employment they enjoyed prior to the recession brought on by the 2008 financial crisis, and the broader national recovery obscures significant variations between states in financial health since the Great Recession. A mixture of state tax revenue figures, employment statistics, and other economic data analyzed by Stateline indicate a “precarious and uneven” recovery that’s been much more apparent in the West and South than in the Northeast and Midwest.

Bureau of Labor Statistics data on state-level employment show that only Montana, Louisiana, Iowa, Colorado, West Virginia, Massachusetts, Utah, New York, South Dakota, Oklahoma, Alaska, Texas, and North Dakota have more total people working than they did at the end of 2007. The other 37 states have failed to regain their pre-recession job levels.

While California’s economy has added 800,000 jobs in the recovery, it lost nearly 1.4 million jobs in the collapse. And relative to many states, California counts as a success story. Arizona, Florida, and Nevada — the states whose economies were most dependent on the housing market — have made far less progress back to their previous job levels. California is 3.4 percent below it’s pre-recession jobs level, while Nevada is 10.1 percent behind, Florida lags by 6.4 percent, and Arizona trails by 5.7 percent.

State tax revenues have showed the same sort of uneven progress. In total, state tax revenue has increased each quarter for 13 consecutive quarters since the beginning of 2010 and is nearly back to pre-recession levels. But 11 states had yet to regain their pre-recession peak levels of tax revenue as of the first quarter of 2013, according to data from the Nelson A. Rockefeller Institute of Government. Overall, sales tax revenue is still 5 percent below its pre-recession peak, reflecting the broader weakness in consumer spending.

Few states have the flexibility to buoy their economies through deficit spending during tight economic times. Balanced budget requirements are common at the state level, creating a wave of automatic austerity in tight times that exacerbated the recession and slowed the recovery. Federal programs that would have helped plug the hole while taking advantage of cheap borrowing costs to invest in infrastructure, education, construction, and manufacturing initiatives around the country have been blocked since Republicans took control of the House of Representatives in the 2010 election. The resulting shift to austerity at the national level has been a drag on economic growth in nearly every quarter since.

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