State Economic Watch

According to the Federal Reserve Bank of Kansas City’s most recent survey , manufacturing activity in the Tenth Federal Reserve District increased in February. The survey’s composite index increased to 5 in February from 0 in both January and December. Almost all of the component indexes (SA) of the survey including production, shipments, and new orders improved m/m, but the employment index fell to -6 in February from 0 in January. However, the average workweek increased slightly from 4 to 6. The six-month expectations indexes all increased measurably in February. The composite expectations index increased to 15 from 7 in January, while the employment index rose to 22 from 3, and the capex index gained 8 points to 13. 

Two very similar reports are circulating this morning which discuss the importance of immigrants to the economies of Ohio and Michigan. Both articles conclude that immigration is necessary to offset normal population declines in these states (either from natural causes or outmigration), generate state tax revenue, satisfy labor demand in selected industries, and maintain staffing in the health care sector. This article from the Ohio Capitol Journal discusses the results of a survey of Ohio economists, while this link to a Michigan Public Radio article explores a recently released report from the Michigan League for Public Policy.

The Federal Reserve Bank of Cleveland has released another of its state trade profiles . This week’s release focuses on West Virginia. According to the analysis by the Cleveland Fed’s economists, Canada is by far the largest import and export trade partner with West Virginia, accounting for 42% of the state’s imports and 41% of its exports in 2024. Beyond Canada, the state’s principal 2024 import partners included the EU and Japan, each at about 20%. The imports were concentrated in transportation equipment (31%) and machinery (13%). The state’s other significant export destinations included the EU at 19% and China at 9%. Historically, minerals and ores were the dominant export for West Virginia, but that category had declined to only 8.5% by 2024, with chemicals and transportation equipment together accounting for approximately 61% of all exports that year.

This morning’s release of the December 2025 S&P Cotality Case-Shiller Indices confirms most of the house price data contained in the 4Q2025 FHFA House Price Index report. Nationally, the increase in home prices continues to decelerate, with the S&P Coality Case-Shiller National Home Price NSA Index increasing only 1.3% y/y in December, compared to the 1.4% increase posted in November. The National Index value hit its most recent peak in July 2025 and has been declining since then.  According to the press release, the increase in calendar year 2025 is the weakest since 2011. There continues to be a significantly wide dispersion in regional market data, with only New York, Chicago, Cleveland and Minneapolis posting any kind of meaningful y/y home price gains in December. The sun belt continues to be where most of the pain exists, as Tampa, Miami, Phoenix, and Dallas posted y/y declines of at least 1.5%. Denver and Portland also posted notable declines. On a m/m basis, almos...

Today’s release of the FHFA House Price Index (HPI) report for 4Q2025, indicates continued deceleration in home price appreciation nationally. The national Purchase-Only FHFA HPI (SA, nominal) increased 1.82% y/y in the quarter compared to 2.37% in 3Q2025 and 3.12% in 2Q2025. The quarterly y/y rate of growth in the index has been declining each quarter since its recent peak of 6.53% in 1Q2024 and its historic peak of 18.2% in 3Q2021. The strongest y/y growth in house prices in the quarter occurred principally in the upper Midwest, although parts of the Northeast also saw strong gains, with North Dakota, Delaware, Illinois, Wisconsin, and Michigan comprising the top five states. Nine states posted y/y declines in their respective HPI indexes. Florida saw the largest decline, followed by Montana, Colorado, West Virginia, and Idaho. The below exhibit is from the FHFA release.

A new study from the South Carolina Manufacturers and Commerce organization examines the impact of manufacturing on the state’s economy and the outlook for employment growth in the sector over the next six years. In the report entitled The Economic Impact of Manufacturing in South Carolina , the authors estimate that manufacturing contributes, directly and indirectly, approximately $300 billion to the South Carolina economy. Most of the report is backward looking and focuses principally on defining the state’s manufacturing profile. However, on page 32, the authors begin to discuss the future outlook for the state’s manufacturing sector and identify the 20 manufacturing jobs that they estimate will be in the greatest demand over the next six years. These high growth potential jobs cover a wide range, from mechanics to front line workers to engineers and inspectors. According to the study, employment in these 20 job types collectively is projected to increase 12.6% through 2032. Finall...

According to the latest release of the Business Leaders Survey from the Federal Reserve Bank of New York, the business environment for New York metro area services firms continues to deteriorate. In the new February 2026 survey, the top line business activity index fell ten points m/m to -25.7. The business climate index also fell markedly, decreasing 7 points to -41.7. Additionally, the employment, capex and supply availability indexes were all down moderately, while the wage index ticked higher. Despite all the present gloom, metro area service sector firms remained optimistic about the future, with the six-month forward business activity index increasing five points to +17.5. The employment and capex expectations indexes were essentially unchanged m/m, but remained in modestly positive territory. The below graphic from the press release illustrates the 20-year history of the business activity index.  Source: Federal Reserve Bank of New York

A fond farewell to the monthly state JOLTS report. This morning’s release from the US Bureau of Labor Statistics of December 2025 state JOLTS data is the last monthly report that will be issued. Going forward, the state JOLTS data will be released annually, with the first release scheduled for July 2026. That said, the newly released December figures show little movement in the state job markets. Job opening rates fell in six states led by Vermont, New Hampshire, New York and Rhode Island, but were unchanged in 44 states. Hires rates fell in three Northeastern states, New Hampshire, Maine, and Vermont. Nevada was the lone state to see an increase in the hire rate. Layoff and discharge rates were little changed nationwide, decreasing slightly in Idaho and New Jersey, but increasing in Michigan. The below graphic illustrates the range of job opening rates nationally in December. Source: US Bureau of Labor Statistics

As part of his State of the State address, Illinois Governor JB Pritzker is expected to propose a new statewide zoning law called Build Up Illinois Developments , which would limit the zoning control that local governments currently enjoy. The proposal would reduce restrictions on multi-unit housing in areas that are zoned residential, including allowing the construction of “granny flats”, backyard cottages, and above garage apartments. The proposal also includes $250 million in capital funding to support these new housing initiatives. The Governor’s proposal is designed to address the state’s housing shortage. A study by the University of Illinois concluded that the state would need to see 227,000 housing units constructed over the next five years to meet projected demand.

The Federal Reserve Bank of Cleveland has released another in its series of state trade profiles. The new release focuses on Pennsylvania . The state is a significant net importer with total imports in 2024 of $127.3 billion dwarfing exports of $53.5 billion. Imports have risen substantially since 2020, while exports have remained somewhat flat. The EU accounts for the largest percentage of Pennsylvania imports at 30% as of 2024, with China at 13% and Canada at 11%. Chemicals, principally in the form of pharmaceuticals and medicines accounted for over 32% of all imports, while computer and electronic products made up almost 14% (about half of which came from China). The economists from the Cleveland Fed note that the state’s oil and gas imports have declined significantly since 2008, as Marcellus Shale production developed. Pennsylvania’s largest export markets are the EU and Canada at 28% and 21%, respectively. The export product mix is heavily weighted to chemicals and computer and e...

The February Empire State Manufacturing Survey from the Federal Reserve Bank of New York indicates continued modest expansion in manufacturing activity in New York State. The headline general business conditions index remained in modestly positive territory with a diffusion index of 7.1 compared to the 7.7 registered in January. The unfilled orders index showed solid improvement, moving from -8.2 in January to 9.1 in February, while the employment and average workweek diffusion indexes also moved from negative to positive m/m. Outlook indexes also generally improved, with the general business conditions six-month forward index increasing to 34.7 from the prior month’s 30.3. The forward capex and employment indexes also posted gains.

A new report from the Idaho Alliance for a Legal Workforce suggests that the Idaho economy may take a significant hit from a large reduction in foreign-born workers. The authors analyzed the three sectors in the state that are most dependent on immigrant workers, agriculture, dairy, and hospitality, and concluded that a 50% reduction in the immigrant labor pool in these sectors could result in direct and knock-on reduction in state GDP of $5.1 billion.

A new post by the economists at the Federal Reserve Bank of Kansas City looks at the impact of recent ag sector financial pressures on farmland values. They found that despite the deterioration in farm finances last year, land values in the Tenth District have generally held up well. Farm income was down overall in 2025 and liquidity remained stretched, with 45% of farm borrowers posting current ratios under 1.5. However, the economists found that farmland sales, demand, and land prices in the Tenth District have been fairly strong. Ranchland prices have been particularly resilient, thanks to the strength in cattle prices. The below graphic is reproduced from the Kansas City Fed’s post. Source: Federal Reserve Bank of Kansas City

The latest regional manufacturing survey from the Federal Reserve Bank of Minnesota reflects moderate optimism on the part of District Nine manufacturers. Of the 350 firms surveyed, 42% expected orders to increase in 2026 while 21% expected them to fall, for a diffusion index of 61. The question about production expectations produced a diffusion index of 58, while the employment and capex questions registered lower, but still expansionary readings of 52 and 51, respectively. By comparison, respondents reported that actual results for all these measures in 2025 produced diffusion indexes in the high 40s. Despite the renewed optimism, cost pressures remain a significant challenge with the diffusion indexes for selling prices and inflation coming in a 70 and 73, respectively.

Delinquency and foreclosure rates in most states moved higher in December according to the most recent ICE Mortgage Monitor . The national rate of total non-current mortgages ticked up to 4.1% as of December 31, 2025, from 3.8% as of October 31, 2025. The states with the highest non-current rates are still clustered in the south, with Louisiana at 8.6%, Mississippi at 8.4%, Alabama at 6.4% and Arkansas and Indiana at 6.0%, and all five were higher in December than in October. Idaho, Washington, Montana, and Colorado had the lowest non-current rates, all under 2.5%. The states seeing the greatest increase in non-current rates y/y were Maryland (+10.6%), Utah (+9.5%), and Arizona and Arkansas (+8.5%). Conversely, the states posting the largest declines in non-current rates were Florida (-8.8%), Hawaii (-5.7%), and South Carolina (-5.5%).

A new posting from the Federal Reserve Bank of Kansas City analyzes the health of the Oklahoma labor market. Its economists found that the state’s labor market remains healthy, as evidenced by continued low unemployment, but that its hiring dynamics are showing considerable weakness. Oklahoma’s unemployment rate remains below the national average at about 3.6%, but its hiring rate, which has traditionally been above the US average, fell below the US rate in 2H2025. Its hire rate fell from a peak of 5.5% in 2022 to 3.1% in 2H2025. The near term outlook isn’t encouraging with 70% of Oklahoma businesses in a recent KC Fed survey expecting employment to be flat or down in 2026. The firms cited “low growth expectations and economic uncertainty” as the principal reasons for the low pace of hiring.

Stateline takes a look at the recently released Census migration statistics and finds an ironic and overlooked element to the US immigration saga. It appears that the surge in immigration over the last few years may actually help some “red states” gain Congressional seats once the 2030 census is conducted. While current federal immigration policies have depressed the inflows since 2025, states like Texas and Florida are nevertheless still expected to pick up House seats in 2030 thanks, in part, to the 2020-2024 surge.

Governing has looked beneath the surface of California’s economy and has found some sobering statistics. While it ranks as one of the largest economies in the world in terms of GDP, California’s labor market is among the weakest in the US. The state’s rate of job growth ranked 37th in 2025, and its December unemployment rate of 5.5% was the highest in the country. Economists point to the Bay Area as a principal source of weakness, as the region lost 20,000 jobs in 2025.

A recent report from economists at the Federal Reserve Bank of Dallas discusses the continued importance of utility-scale solar to Texas’ economic development, particularly when it comes to data centers. They note that Texas is the top state for utility-scale solar generation and that, despite current challenges from policy changes at the federal level, the state added as much solar generation in 2025 as it did in 2024 and is expected to add significant additional capacity in 2026. The economists conclude that the state's energy demand will continue to increase over the next five years as a result of “demand from data centers, cryptomining, oil field electrification and new industrial customers”, and that solar will remain “ part of the energy mix and an important driver of data center development in Texas”.

 Excellent special section in yesterday's New York Times that highlights the impact of the Trump Administration's policies on the states. Most of the pieces in the section are very quick, short reads, but there are a couple of interesting longer write-ups, such as one that discusses the impact of the Administration's trade policies on Port of Seattle longshoremen, and another that describes the negative effect that the Administration's aggressive approach to Canada is having on the economy of northern Vermont.

The most recent quarterly survey from the Association of Washington Businesses indicates a continuing deterioration in outlook of Washington State businesses, with 34% of respondents expecting the state to enter into recession within the next year, and only 9% rating the state’s economy as strong. The number of businesses planning to leave the state increased to 17% from 9% a year ago, and 44% of business leaders indicated that that they were considering moving their personal residences out of state. Additionally, only 14% of respondents planned on expanding their businesses in the state, while 30% said they anticipated expanding in another state. Much of this erosion in confidence stems from the tax package passed by the legislature last year, as 64% “rate the overall tax burden as their most important business challenge”.

The Nebraska Legislature has passed a major restructuring of the state’s minimum wage structure, capping the annual increase at 1.75% rather than the cost of living adjustment approved by voters. The State Senator sponsoring the legislation said that it was done in response to “a request from many of the business community”. In addition to capping the annual minimum wage increases, the legislation also restructures the wage scale for younger workers by instituting a new “youth wage” for 14-15 year olds, and adjusting the “training wage” scale for workers 16-20 years old. All of these changes would take effect in July of this year. The state’s governor is expected to sign the legislation.

North Dakota has announced that it will be offering some state employees early retirement incentives to help alleviate budget pressures. While the overall savings goal is unspecified as of yet, the reductions are intended to offset the drop in oil and gas tax revenues caused by the decline in oil prices, as well as the structural revenue losses resulting from the federal OBBB Act. The state has offered similar incentives in the past when oil prices have fallen.

Fifteen state treasurers have sent a letter to President Trump expressing significant concern over the economic impacts of the administration’s aggressive immigration enforcement policies. They stress that these policies affect the willingness of people to go to work and travel freely within commercial districts and, as a result, are damaging economic activity in their states.The treasurers of Rhode Island, Minnesota, Massachusetts, Illinois, New Mexico, Colorado, Oregon, Maryland, Vermont, Washington, Connecticut, New York, California, Nevada, and Delaware are signatories to this letter.

In its biennial report , the Kentucky Distillers Association concludes that the bourbon industry contributes $10.6 billion to Kentucky’s economy and supports direct and indirect state employment of approximately 24,000. To put that into context, the state’s current dollar GDP was about $295 billion in 2024, according to the US BEA, and its total employment was approximately 2.05 million in December 2024 according to the US BLS. Despite citing generally upbeat statistics, the report does identify several headwinds for the industry from foreign demand and changing consumer tastes, and raises concerns over the distillery industry’s future employment and capital spending trends given these challenges.

Food for thought from the Canada’s Fraser Institute. Its recently released report, Economic Freedom of North America , measures “the degree to which governments in North America permit their citizens to make their own economic choices”. The study uses data from 2023, incorporating government spending, tax, and labor market regulation statistics to formulate its rankings. It finds that the more “economically free” states enjoy higher incomes and faster population growth than their economically “less free” counterparts. The study gives New Hampshire the highest score of the 50 US states, and New Mexico the lowest.

A minor state economic story, but still highly symbolic. The Campbell’s Company has announced that it will close the Cape Cod Potato Chip production facility in Hyannis, Massachusetts, bringing an end to its 40 year operating history. The company cites efficiency and supply chain optimization as reasons for the closure. Production will move to the company’s other facilities in  Beloit, Wisconsin, Charlotte, North Carolina, and Hanover, Pennsylvania.

The Florida Council of 100 is launching a new promotional campaign to attract business and investors to the West Palm Beach-Miami Florida Gold Coast region. The campaign, called “Ambition Accelerated”, is funded with $10 million in seed money from Steven Ross and Ken Griffin, and is scheduled to be unveiled tonight at the Wall Street Journal Invest Live conference being held in West Palm Beach.

A new report from the University of Hawaii Economic Research Organization (UHERO) takes a very dim view of the state’s economic profile. The report targets the state’s high cost of living and below average economic growth as drivers of its high levels of outmigration. It notes that the state shouldn’t be compared to high growth, gentrifying regions with high housing costs that experience outmigration, but rather to “economically distressed or “left-behind” regions—marked by stagnant productivity and limited opportunity, though typically with much lower costs of living”. Finally, the report concludes that policy prescriptions shouldn’t only focus on affordability, but also on the underlying causes of the state’s economic stagnation.