The Federal Reserve Bank of Philadelphia produces coincident indexes for each state and the nation on a monthly basis. The January data has recently been released (Excel file) with the February data to be released March 30th. The indexes are created using four economic variables: nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and real wage and salary disbursements. The underlying trend in the indexes is set to match each state’s Gross Domestic Product (or Gross State Product). As a coincident index, the data is designed to report current economic conditions on a monthly basis, and therefore is not a leading or a lagging indicator. The indexes provide one of the better real-time economic variables available to gauge the current health of state economies and given the consistent composition of the indexes across states, they allow for direct comparison between states. As the underlying variables are revised to incorporate current data, the coincident index is likewise revised to reflect the economic trends in each state.
The national economy appears to be near a turning point in terms of the labor market (i.e. many forecasters, both private sector and public sector, are projecting positive job gains in the coming months) as job losses have slowed and also the temporary hiring of U.S. Census workers is ramping up through May. Similarly many states also appear to be at or near the trough of the recession, according to their coincident indexes. On a one month basis, that is the change from December 2009 to January 2010, nineteen states experienced an increase in their indexes, while an additional eight states saw no change (Oregon’s index declined slightly at 0.16 percent). The table below shows each state’s coincident index change on a three month, six month and twelve month basis, along with a corresponding ranking.
Given the February employment estimates released yesterday, it is expected that Oregon’s coincident index for February will again be relatively unchanged on a month-over-month basis – with nonfarm employment falling 1,200 in February and the unemployment rate decreasing from 10.7 percent to 10.5 percent, the net effect is expected to be close to zero. It will be important to keep tracking the coincident indexes for the state moving forward as the index allows one to gauge the relative health of the economy. As Oregon’s labor market begins to transition into recovery, the coincident index will reflect these changes.