The phony boom. Greg Gerritt 12/2/17
This essay is based on a reading of two reports, one by the Bureau of Economic Analysis and the other by the Bureau of Labor Statistics.
I am presenting a little off the cuff analysis/comparison of these fall 2017 reports, one on GDP growth by the Bureau of Economic Analysis, and one on employment growth from the Bureau of Labor Statistics. The BEA report is pretty straight forward, the GDP growth rate in each state and what industries are contributing to growth or the shrinking of the economy. The BLS report is a bit more complicated a concept to grasp. It lists which industry in each state had the largest growth in employment by percentage. The order presented is a bit strange, with states ranked by their fastest growing industry, and conversely, which industry in each state was the industry with the biggest percentage loss of jobs. Ordered by the fastest losing industry in each state.
The two reports do not cover exactly the same time periods, so they are not strictly comparable, but they overlap in time, and generally show the same trends, so I think pointing out what they show about the economy might be useful.
Top 10 states for growth 2nd quarter 2017
1. ND, WY, TX, OK, MI, AK, NM, WV, UT, CO 10. 8.3 to 3.9% 1 to 10.
RI 31st at 2.3% MA 2.0
States with the slowest growth
51 IA, SD, DE, MT, NE, MN, NY, CT, KS, VA, HI 40 (-0.7) to 1.5% 51 to 40
Rhode island’s rank is pretty much where it usually is, somewhere around 30 and 70% of the national growth rate (you should check it out in the BEA archives, we are pretty consistent)
The BEA analysis of their report is as follows
“Nationally, mining increased 28.6 percent and was the leading contributor to growth for the nation and in the three fastest-growing states of North Dakota, Wyoming and Texas in the second quarter (table 2). Mining contributed to growth in 49 states led by increases in oil and natural gas production. (This means fracking)
By contrast, agriculture, forestry, fishing, and hunting decreased 10.6 percent and subtracted from growth in 25 states, including every state in the Plains region, which experienced high levels of crop production in 2016. This industry was the leading contributor to the decreases in real GDP in Iowa and South Dakota–the only two states to decrease in the second quarter.”
Did you notice that high levels of crop production lead to a drop in GDP on the Plains? Agriculture prices are very low (part of the governments cheap food strategy) (USA has the lowest food prices compared to income of any place in the world, balanced out by the highest health care costs, which is partly driven by eating sugar laden cheap food)
“In addition to mining; professional, scientific, and technical services; health care and social assistance; retail trade; and information services were the leading contributors to U.S. economic growth in the second quarter.
Professional, scientific, and technical services increased 5.1 percent nationally–the seventeenth consecutive quarter of growth. This industry contributed to growth in every state and the District of Columbia. It includes activities such as legal, accounting, engineering, and computer services.
Health care and social assistance increased 4.7 percent nationally. This industry contributed to growth in 49 states and the District of Columbia.
Retail trade increased 5.6 percent, rebounding from a decrease in the first quarter, and contributed to growth in 49 states and the District of Columbia.
Information services increased 7.0 percent in the second quarter and contributed to growth in 46 states and the District of Columbia.”
This data is from the BLS report
Major industries with the largest over-the-year percentage increase in employment by state, October 2016–October 2017
What this is is a chart of states listed by the largest percentage employment gains in any one major industry. States are ranked according to how fast their fastest growing industry gained employment (only copied part of the chart, in this case the states with the 17 fastest growing state sectors of the economy)
North Dakota: Mining and logging
Texas: Mining and logging
Vermont: Mining and logging
Wyoming: Mining and logging
Rhode Island: Construction
Nebraska: Mining and logging
New Hampshire: Mining and logging
South Dakota: Mining and logging
Oklahoma: Mining and logging
West Virginia: Mining and logging
Massachusetts: Mining and logging
Minnesota: Mining and logging
Georgia: Mining and logging
Maine: Mining and logging
Alaska: Other services
I simply copied the chart of the website until I came to a state in which neither construction nor mining was the fastest growing employment sector.
I focused on mining and construction because they are both completely unsustainable on planet Earth and represent short term boosts, that are often followed by busts as wells play out and banks fail. And so much of the construction is fossil fuel insfrastructure.
And the other states in the top 10 in growth
Michigan: Mining and logging
Utah: Professional and business services
New Mexico: Construction
Colorado: Other services
I think the only two states in the top 10 in growth that are not setting themselves up for the fall are UT and CO, and they have consistently been a top growth state for years, unlike many of their neighbors which have seen their economies on a yo yo with the fracking boom/busts of the last few years
This is the sectors that lost the largest percentage of employment in each state
I think the industries in each state that are losing employment are also a very telling indicator. Copied only half the chart, the biggest losers.
Major industries with the largest over-the-year percentage decrease in employment by state, October 2016–October 2017
North Carolina: Information
Kentucky: Mining and logging
Montana: Other services
New Mexico: Mining and logging
Hawaii: Financial activities
West Virginia: Information
New York: Manufacturing
Oklahoma: Other services
Utah: Mining and logging
North Dakota: Construction
North Dakota: Leisure and hospitality
Wyoming: Leisure and hospitality
Rhode Island: Professional and business services
Mining and logging shows up in a few states as experiencing losses in employment ( Kentucky stands out as coal collapses) including some states experiencing rapid economic growth, such as New Mexico and Utah (UT showing strong growth in services) but for the most part the biggest losers in each state were in the industries we are told are the future: Information, services, financial services. Rhode Island is also losing jobs in sectors we are being told to count on for the future and that are the core of much of our economic development strategy.
Also of great interest is the losses in Leisure and hospitality in Wyoming and North Dakota. Maybe no one loves that dirty fracking water?
The orange headed monster will take credit for “excellent, huge, fantastic” growth numbers. And he will tell you that it is the reduction of regulations that is producing the great fossil fuel extraction boom that is driving economic growth in the USA. I lean towards the deregulatory fervor having limited effect and the improvements in technology that make fracking profitable at lower gas prices is what is driving the boom, though the government is doing all they can to make protests illegal and build pipelines, literally bulldozing communities in pursuit of private profit for contributors to the TRUMP. The story of the fracking boom is that as it geared up, resistance grew, but prices were high so drilling went hell bent for leather. Gas prices fell, the boom stopped and ND, TX, and WY went into economic free fall. Technology improved, they were able to drill wells more cheaply, and with the slight rise in prices due to reduced drilling, they went back into profitability and started drilling. The government is also coming up with all sort of new subsidies.
In other words the growth we see is a house of cards built on very shaky ground that one more destructive hurricane might wash out to sea. A turning out of a Congress that seems hell bent on killing off the people of the planet in exchange for money from the well could also change the economics, but even if that does not happen, the fracking boom will cease as wells go dry, water supplies are harder to find, energy consumption continues to drop, renewables become cheaper, and resistance grows.
The flip side is that exactly those industries that they tell us are the real wave of the future, Information, finances, are the industries seeing the biggest drops in employment. Automation, AI, whatever you want to call it, is not producing the jobs promised. Or rather the future is jobless. Overall education and healthcare are becoming more and more unaffordable, cutting into the growth in employment in those areas, especially as the governments cut funding to pay for tax cuts for millionaires.
This little exercise probably does nothing to convince you of anything. And I am still figuring out how to explain it. It jumps out at me because i look at these numbers regularly and sort of remember what they were the last time the report came out so I have some grounds for comparison and I pay attention to the strategies being offered. But when almost all of the states with fracking booms are at the top of the growth and employment charts and the “industries of the future” are losing employment (even if contributing to GDP growth) get ready for a long hard slog through a jobless future.