State Economic Watch

  The pace of service sector activity growth in the Tenth Federal Reserve District slowed notably in April according to the latest Federal Reserve Bank of Kansas City’s Services Survey . The top line services composite index (SA) fell to 3 in April from 15 in March and 6 in February, and the general revenue/sales index fell to 6 from 18. All three of the employment indexes, employee count, hours worked, and part-time employment fell into negative territory, while the wages index increased from 16 to 22. Nevertheless, the six-month expectations composite index rose for the second consecutive month, to 22 in April from 17 in March, while revenue/sales expectations increased soundly from 20 to 34. The employee and hours worked indexes both fell slightly m/mn, but the part-time employment expectations index increased to 10 from 4. Finally, capex expectations sank to a just barely positive 1 from 19 in the prior month.

Most of the components of the Federal Reserve Bank of Kansas City’s Manufacturing Survey dipped slightly in April but remained in positive territory. The survey’s top line composite index was reported at 10 for April compared to 11 in March and 5 in February, but this was still higher than the -2 reported for April 2025. Almost all of the component indexes (SA) of the survey were lower m/m except for prices paid and inventory. The only index to post negative was new orders for export, which came in at -3. Employee count fell to 2 in April from 7 in March. The six-month expectations indexes were mostly higher in April, but capex and average workweek fell slightly. Nevertheless, all of the expectation indexes were in positive territory in April.

The February 2026 State Employment Report from the US Bureau of Labor Statistics was not much different than the January 2026 report, with the state statistics continuing to reflect a stagnant national labor market. Payrolls were flat in the vast majority of states both on a m/m and y/y basis and unemployment rates were little changed m/m. However, 13 states saw their u-rates rise y/y, with Maryland, Delaware, Florida and Minnesota reporting increases of about 1%. Indiana and Ohio saw their u-rates decline slightly y/y. Arizona was the only state to see meaningful m/m payroll gains in February, while Illinois and Nevada saw losses. Over the year, payrolls were up in California, and Nevada, and down in DC, Maryland, and Iowa. The gains in California were almost entirely driven by significant increases in health and education employment, although the professional and business services category also saw some gains. The situation was similar in Nevada, but increases in leisure and hospita...

Ferrara Candy Company has announced plans to build a 750,000 square foot production facility and associated administrative offices in Orangeburg County, South Carolina. In addition, the Chicago-based company has pledged to hire 1,000 of the state’s residents over the next ten years. For its part, the state has agreed to spend $85 million on site prep, and to provide some tax breaks for the company. The facility is expected to start pumping out Jelly Belly, Nerds, SweeTARTS, and Laffy Taffy in the first quarter of 2029.  

Here’s a link to an interesting Op-Ed by the always equally interesting Alan Ehrenhalt about the revival of Midwestern cities. Ehrenhalt uses recent population statistics to illustrate that cities like Des Moines and Grand Rapids are now growing at a faster rate than that of both other US cities, and of the country as a whole. While Ehrenhalt offers a few possible explanations for this trend, housing affordability appears to be a significant factor. 

The Federal Reserve Bank of Philadelphia’s State Coincident Indexes declined notably in January. The three-month diffusion index fell to 48 from a revised 68 in December. This is the lowest reading for the three-month index since the Covid era. The more volatile one-month diffusion index also fell in January to 42 from a revised 84 in December, but it’s still higher than the revised 24 level posted in November. Similar to December, the states with the most significant three-month declines were West Virginia, Delaware, and Montana, while California and Kentucky posted the largest increases. The exhibit below is reproduced from the press release.