State Leading Indicators

An analysis of State Leading Indicators by the Philadelphia Fed suggests nine states will be in contraction within six months.

The Federal Reserve Bank of Philadelphia has released the leading indexes for the 50 states for November 2019. The indexes are a six-month forecast of the state coincident indexes (also released by the Bank). Forty-one state coincident indexes are projected to grow over the next six months, and nine are expected to decrease. For comparison purposes, the Philadelphia Fed has also developed a similar leading index for its U.S. coincident index, which is projected to grow 1.4 percent over the next six months.

Philadelphia Fed Region

  • Pennsylvania: The leading index for Pennsylvania was -0.5 in November. The state’s coincident index decreased, and the index of delivery times from the Institute for Supply Management’s manufacturing survey rose in November. Building permits decreased, and initial unemployment insurance claims decreased in the same period. Overall, Pennsylvania’s leading index for November suggests contraction in the state’s economy in the second quarter of 2020.
  • New Jersey: The leading index for New Jersey was -0.2 in November. The state’s coincident index decreased, and the index of delivery times from the Institute for Supply Management’s manufacturing survey increased in November. Building permits rose, and initial unemployment insurance claims decreased in the same period. Overall, New Jersey’s leading index for November suggests contraction in the state’s economy in the second quarter of 2020.
  • Delaware: The leading index for Delaware was -0.7 in November. The state’s coincident index decreased, and building permits decreased in November. Additionally, the index of delivery times from the Institute for Supply Management’s manufacturing survey increased in November, while initial unemployment claims decreased. Overall, Delaware’s leading index for November suggests contraction in the state’s economy in the second quarter of 2020.

Those three states are in the Philadelphia Fed region. The Fed provided no details on the other states.

State Leading Index Map

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Bloomberg reports Nine States Face Economic Contraction, Most Since 2009 Crisis

State Projections

  1. West Virginia: -4.5% to -1.5%
  2. Pennsylvania: -1.5% to -0.2%
  3. New Jersey: -1.5% to -0.2%
  4. Vermont: -1.5% to -0.2%
  5. Delaware: -1.5% to -0.2%
  6. Oklahoma: -1.5% to -0.2%
  7. Montana: -1.5% to -0.2%
  8. Iowa: -0.2% to 0.2%
  9. Kentucky: -0.2% to 0.2%
  10. Connecticut: -0.2% to 0.2

The Bloomberg article noted that Iowa and New Hampshire are expected to see marginal growth over the next few months. Thus, New Hampshire must be at the bottom end of its range.

Rising Initial Claims

I picked this idea up from Daniele DiMartino Booth.

Booth notes that "In December, nearly 2/3rds of states had rising initial claims YoY."

Election Significance

I took a lot of flack from Trump supporters over my December 30 post Trump Will Easily Be Defeated in 2020, Perhaps a Landslide

But I stand by it. One of my reasons was the economy. Specifically, I stated "Trump's trade policy has been a disaster to both farmers and the steel industry. Farming woes are well understood, but steel is another matter."

States Trump Won

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Trump barely won many of those states.

Pennsylvania is a state Trump desperately needs to hold on to. This is what the map looks like flipping only Pennsylvania, Wisconsin, and Michigan.

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People generally chimed in "that can't happen".

One person said "I suck at politics, and another said it was too early to say anything".

Well, I called the Brexit election better than anyone, and in 2008, I called 49 of 50 states (Missouri showed me up) in February, well before Obama won the nomination.

The 2008 election was easy because all I did was project Obama would win every state remotely in play. I was positive a huge recession was underway.

Recession Card

There may not be a recession in 2020, and I certainly have a couple of bad calls there. But there does not have to be.

Steel Futures

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How well are Trump's steel revival promises going to play out in Pennsylvania, Ohio, and Michigan?

Might not just a few farmers in those states be more than a little pissed off at Trump's inane tariffs?

Trump Popularity

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Allegedly Great Economy

Despite Trump's proclamations of best economy in history and a stock market that was at an all time high yesterday, Trump has never polled over 50% nationwide.

Manufacturing ISM Down 5th Month to Lowest Since June 2009

Earlier today I posted Manufacturing ISM Down 5th Month to Lowest Since June 2009.

My opening lead was "Unlike the dip in 2015, this isn't energy related."

Now nine states are faltering.

Some of the Philly Fed analysis was based on ISM. Today's ISM data is not yet reflected in the Philly Fed analysis.

Reader Sechel made this mostly-accurate assessment to my ISM post: "Trump campaigned on reviving manufacturing, not services. It doesn't feel like he's been very successful. Tariffs and quotas are not a strategy."

Tariffs and quotas were indeed a strategy, just a very poor one.

Bullying Iraq and Iran

Yesterday, I reported: Trump Fires Missiles at Iraq Kills Iranian Revolutionary Guard Leader

Trump bullying Iraq and Iran is sure to piss off moderates. And there are more US troops in the Mideast than ever.

More broken promises? You bet.

Appealing to the warmonger base is not going to get one more vote for Trump. But it may get the independents to decide "anybody is better than Trump", well, perhaps anybody but Warren.

Trump barely beat Hillary Clinton, arguably the worst candidate in decades, perhaps ever.

Referendum on Corbyn, Referendum on Trump

The British election was easy to call. I was one of few confidently predicting a solid to blowout win for Boris Johnson.

Why: The British election morphed into a referendum on Jeremy Corbyn, a Marxist.

Trump managed to do two things in 2016: appeal to the rust belt and turn the election into a referendum on Hillary.

Unless the Democrats are foolish enough to nominate another lightning rod, this election is likely to morph into a referendum on Trump.

Yet, the US economy is clearly sputtering and Trump's trade policy has been a disaster in states he barely won and needs to win again.

Good luck with that.

Mike "Mish" Shedlock

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