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The Slump Struck Some States More Than Once

Economic Trends


If the recession of 1990-91 is a puzzle for economists, in part that's because two different recessions have been rolled into one.

On the one hand, a deep downturn in manufacturing has cost some 680,000 jobs over the past year, but the pain has been spread out evenly across the country. Based on the most recent figures from the Bureau of Labor Statistics, 41 states saw a decline in manufacturing employment in the year from April-May, 1990, to April-May, 1991. The biggest loser was California, with a fall of 86,000 manufacturing jobs, but there were 10 other states where the manufacturing-employment loss exceeded 20,000.

By contrast, the recession in the service sector--ranging from banking to retailing to government--has zeroed in on just three states: New York, Massachusetts, and New Jersey. The U.S. overall lost about 40,000 finance jobs in the past year. However, that decline was concentrated in those three states, which alone account for 94% of the decline in financial-sector employment. The same three laggards are responsible for 76% of the drop in U.S. retail and wholesale trade jobs. And while New York, Massachusetts, and New Jersey were losing some 53,000 federal, state, and local government jobs, the rest of the country was adding 129,000 government jobs.

The service sector has expanded in such states as Texas and Washington, even during the recession. In the five states that showed the greatest job gains over the past year, nearly 90% of the growth came from the service sector (chart). One example: The oil shock helped Texas gain some 6,000 oil-related jobs in the past year, but 32,000 new government jobs were much more important in helping the state grow.

The apparent vigor of the service sector outside of New York, Massachusetts, and New Jersey means that as the manufacturing sector revs up again, most parts of the country will see a real economic expansion. But the depth of the service-sector downturn in these three states underscores the struggle they face to get back to economic health.

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