State Economic Watch

Non-current mortgages moved lower in July, according to the most recent ICE Mortgage Monitor . The service reported that total non-current mortgages nationally dropped to 3.9% in the month compared to 4.1% in June, with the delinquency falling to 3.4% from 3.6% in the prior month, and foreclosures holding steady at 0.5%. However, both of these figures were higher y/y. Delinquency and foreclosure rates were the highest in the South and Midwest, with Louisiana (8.2%), Mississippi (8.1%), Alabama (6.0%), Indiana (6.0%), and Arkansas (5.6%) comprising the top five. The states with the best performing mortgages in July were concentrated in the West, with Idaho, Montana, Washington, California, and Oregon reporting the lowest non-current rates, all 2.4% or less. The states seeing the greatest y/y increase in non-current rates were Hawaii (28.7%), Colorado (+17.2%), Michigan (+16.4%), Kentucky (+15.8%), and Indiana (+14.1%). New York, South Dakota, Wyoming, and Idaho say y/y declines in thei...

The Hawaii Department of Business, Economic Development and Tourism moved its estimate of the state’s GDP growth lower in its latest quarterly economic report . The Department now estimates  real GDP growth of 1.3% for the state in 2026 compared to the previous quarterly estimate of 1.6%. Additionally, it forecasts growth of 1.6% in 2027 and 1.8% in 2028 and 2029. Actual real GDP growth in 2025 was 2.5%. Non-ag employment growth is projected to be 0.3% for 2026 and 0.5% in 2027, 2028, and 2029. Finally, the Department anticipates an increase in visitor arrivals of 0.9% in 2026 with shorter stays and 4.5% fewer visitor days, but an increase in visitor spend of 2.3%. 

The new Connecticut Consumer Outlook Survey from the CBIA Foundation Economic Growth & Opportunity indicates that most of the state’s residents are under increasing financial pressure. According to the survey results, 50% of Connecticut residents view themselves as worse off financially than a year ago, and only 9% think they are in better shape. Further, 40% expect their financial condition to deteriorate over the next twelve months. As far as the overall Connecticut economy is concerned, 42% think it will be bad or mostly bad over the course of the next year, while 57% expect a recession in the next twelve months. One of the principal drivers of these downbeat figures appears to be the cost of living, as 87% of respondents indicated that the cost of living in the state has risen slightly or significantly over the last year.

In its latest quarterly forecast , the University of Virginia's Weldon Cooper Center for Public Service has upgraded its projection of Virginia’s GDP growth to 0.5% in 2026 compared to the 0.2% decline it had forecast in May. Consistent with prior forecasts, the UVA economists see the state’s economic growth improving after 2026, with the new forecast calling for state GDP growth of 1.4% in 2027 and 1,6% in 2028. However, they note that the state’s economic growth is not accompanied by a corresponding growth in employment, as they forecast a 18,500 decline in payrolls for the state in 2026. While the state’s unemployment rate has continued to stay low, the UVA economists note that this has been due, in part, to sizable declines in the state’s labor force since early 2025. 

A new poll from the Albuquerque Journal found that only 16% of those polled ranked the New Mexico economy as good, while only 1% thought it was excellent. On the other side of the ledger, 43% of respondents said the economy was fair and 38% labeled it as poor. In fairness, these results are reportedly not too dissimilar to those of the previous poll taken in 2024.

A new article in the Minnesota Reformer discusses the potential risk AI poses to Minnesota’s “headquarters economy”. The article suggests that the state’s economic culture is more supportive of Fortune 500 headquarters than of tech start-ups, making it more vulnerable to advances in AI. It cites a February 2026 report from NorthStar Policy Action and the University of St. Thomas, which concluded that “one-third of working Minnesotans, or over 800,000 workers, are in jobs with high levels of exposure to GenAI”. However, this doesn’t necessarily mean that AI will displace all of these workers. Instead, the report notes that “exposure could lead to supplementing existing jobs, rather than replacement”. 

In today’s release of the Federal Reserve’s August 2026 Beige Book , ten of the twelve federal reserve districts reported moderate growth since early July, but the Kansas City and San Francisco district banks reported no change in economic activity. Both reported softening consumer spending, as high energy prices pressure wallets and force consumers not only to shift to value-oriented retail establishments, but also to increase their use of credit cards for purchases. Financial institutions noted that some stress in loan portfolios is beginning to materialize.

  In the July 2026 State Employment and Unemployment report, the US Bureau of Labor Statistics (BLS) cited New Jersey as the only state to see a “statistically significant” m/m reduction in nonfarm payrolls in July. The state posted a loss of 25,600 jobs (0.6%) in the month. According to the seasonally adjusted numbers tabulated by the BLS, these losses were concentrated in the Professional and Business Services (-13,400) and Leisure and Hospitality (-7,300) categories. This citation by the BLS has generated the typical press coverage , complete with political spin.  A look at the non-seasonally adjusted (NSA) numbers provides some interesting color, though. The Professional and Business category did in fact post a loss of 14,200 jobs m/m on an NSA basis, providing some support to the argument that the state’s high cost of living is driving out businesses. However, the Leisure and Hospitality sector actually added 1,100 jobs on an NSA basis, thereby supporting the claim that ...

In the August 2026 edition of its AgLetter , the Federal Reserve Bank of Chicago reports that farm values in the Seventh Federal Reserve District held steady y/y in the second quarter. As the below exhibit illustrates, the results were split, with farm values in Illinois and Iowa seeing gains, while those in Wisconsin and Indiana posted y/y losses. However, the Chicago Fed’s economists note that in real terms, farm values in the district declined 3.7% y/y in the quarter. Some lenders commented that “investment activity for data centers and solar and wind farms helped hold up agricultural land values”. The below exhibit is reproduced from the Chicago Fed’s August AgLetter . Source: Federal Reserve Bank of Chicago  

The results of Federal Reserve Bank of Kansas City’s August Services Survey indicate a weakening services sector in the Tenth Federal Reserve District. The top line composite index moved into negative territory for the first time since November 2025, falling to -3 in August from 14 in July. Similarly, the general revenue/sales index fell to 0.0 in August from 19 in the prior month. The employment indexes, employee count, part-time employment and hours worked, were all in the negative single digit range, but it should be noted that these indexes have been bouncing between single digit positive and single digit negative all year. The declines in the six-month expectations indexes were particularly grim, with the composite index falling to 5 in August from 24 in July, and the general revenue/sales index falling to 12 from 39. Finally, the employment six-month expectations indexes all moved from modestly positive to modestly negative territory. One survey respondent noted that “business ...

The Texas manufacturing sector posted solid growth in August according to the results of the Federal Reserve Bank of Dallas Texas Manufacturing Outlook Survey . The top line production index increased six points m/m to 16.1, while the new orders index jumped to 22 in August from 5.4 in July. Capacity utilization and shipments also increased m/m. Additionally, the general business conditions index and the company specific outlook index both gained in the month. The only relatively weak area was employment, with the employment measure falling, while the hours worked index ticked up only slightly. However, all of the six-month forward expectations indexes, including the employment measures, were higher m/m. The results from the Texas Service Sector Outlook Survey were a bit more muted. The top line revenue index fell in August to 6.6 from 9.5 in the prior month. Similar to the Manufacturing Survey, the employment and part-time employment indexes were lower m/m, but the hours worked index...

The Federal Reserve Bank of Philadelphia’s State Coincident Indexes continue to sit in firmly positive territory. In July, the three-month diffusion index improved to 86 from the 84 registered in June. This is the fourth consecutive month in which the three-month diffusion index was 80 or greater. The indexes increased in 46 states with only Kentucky, Hawaii and Alabama posting index declines over the three-month period. Oklahoma’s index was flat. However, unlike the Alabama and Hawaii indexes, Kentucky’s index improved m/m in July. Fifteen states posted over 1.0% increases over the last three months, led by West Virginia and Rhode Island. The exhibit below is reproduced from the press release.  

The Ag sector continued to be under financial pressure in the second quarter but, according to the economists at the Federal Reserve Bank of Kansas City , “the pace of decline in farm loan repayment rates and farm income slowed slightly in recent months”. Based on the results from the second quarter Federal Reserve Surveys of Agricultural Credit Conditions, the economists conclude that while loan repayment rates continued to decline in the quarter, the pace of the decline has moderated, as has the rate of decline in farm income. Nevertheless, the survey results indicate that lenders continue to tighten credit standards. Despite all of this, farm values continue to remain strong, as the economists report that “the value of nonirrigated cropland across all regions increased by an average of about 2.5% from the previous year during the second quarter”. 

In the most recent economic forecast , released yesterday by the Oregon Department of Administration, the Oregon state economist reports that “state level economic growth, which has lagged the national trend through all of 2025, looks to have largely caught up to the U.S.”, and that “the state’s economic outlook has improved somewhat in the immediate n ear-term compared to the prior forecast iteration”. The resultant upside surprise in personal income tax collections has boosted the revenue outlook for the state’s general fund. 

The summer improvement in home prices was confirmed in the latest release of the S&P Cotality Case-Shiller Indices. The National Composite Index (NSA) increased 1.5% y/y in June, compared to the 1.2% annual gain reported in the prior month. Nevertheless, seven metros in the 20-City Composite Index, primarily concentrated in the West and Sunbelt regions, posted y/y losses. Seattle saw the largest decline at -1.95%, followed by Las Vegas (-1.90%), Denver (-1.24%), Tampa (-1.19%), Phoenix (-0.88%), Dallas (-0.66%), and Portland (-0.38%). Growth rates posted by the top five cohort illustrate the wide geographic disparity in the current US housing market, with home prices in Chicago increasing 6.9% y/y, New York 4.79%, Cleveland 4.13%, San Francisco 3.22%, and Boston 2.71%. 

Manufacturing activity in the Philadelphia area increased in August, but services activity declined according to the two recent surveys from the Federal Reserve Bank of Philadelphia. Its August Manufacturing Business Outlook Survey indicates expansion in regional manufacturing activity, with the top line general business activity index increasing to 47.4 in August from 41.4 in July and, notably, the employee count index rose to 27.9 from 10.0 in the previous month. Similarly, the forward-looking six-month expectations indexes rose significantly with the general business activity index increasing 39 points to 73.6, its highest level since August 1983.  The story was entirely different in the services sector, with the Philly Fed’s Nonmanufacturing Business Outlook Survey registering m/m declines in almost all of its indexes in August. The top line general business activity index fell from a weak +7.4 in July to -10.6 in August. The employee count indexes were barely positive, and t...

  After five consecutive quarters of deceleration in home price appreciation, today’s  release of the FHFA House Price Index (HPI) report for 2Q2026 reflects a modest improvement. The national Purchase-Only FHFA HPI (SA, nominal) increased 2.13% y/y in the quarter compared to 1.88% in 1Q2026 and 2.03% in 4Q2025. Nevertheless, this is a far cry from the index’s most  recent peak y/y growth rate of 6.42% in 1Q2024 and its historic peak of 18.17% in 3Q2021. The states with the strongest y/y growth in house prices were diverse, with Alaska, Vermont, Hawaii, Illinois and West Virginia comprising the top five states. Four states posted y/y declines in their respective HPI indexes led by New Mexico, followed by Washington, Colorado and California. The below exhibit is from the FHFA release. Source: FHFA

The US Bureau of Reclamation’s Final Environmental Impact Statement on the future management of the Colorado River has significant negative implications for the Arizona economy according to a statement by the state’s Department of Water Resources . This is a complex situation as the long term drought in the west has raised concerns about the operations of the Glen Canyon and Hoover dams. The inability of the seven states that draw water from the Colorado to negotiate a new water usage agreement risks the imposition of a federal government solution, which could have significantly impact the economies of Arizona, California and Nevada. This article from the Arizona Mirror provides a good overview of the situation.

Washington State businesses continue to be in a dour mood according to the results of the summer Washington Employers Survey from the Association of Washington Businesses.  According to the most recent quarterly survey, conducted July 8-22, 38% of the state’s businesses view the state’s economy as weak or very weak, compared to 26% in the summer 2025 survey. However, relocation plans are down slightly, with 16% of respondents considering relocating to another state, down from 24% in the spring 2026 survey, and the number of business leaders considering moving their personal residences out of Washington State fell to 45% from 55% in the spring. Similarly, 14% of respondents are considering expanding in Washington state compared to only 9% in the spring survey, while 33% plan to expand their businesses in another state compared to 38% in the spring. The survey respondents continue to cite taxes and government regulations as the principal challenges for businesses in the state. ...

Business conditions in the Texas services sector remained stable in July according to the latest Texas Services Sector Outlook Survey from the Federal Reserve Bank of Dallas. The top line revenue index held steady at 9.5 compared to the 9.8 posted for June. The employment index fell from 8.1 to 2.6, but the company outlook and general business activity indexes both increased modestly. The six-month forward expectations indexes were mixed, with the revenue index unchanged m/m and the employment indexes up slightly.