Notice that the economies of nearly all of the states presently in recession depend heavily on oil production. Oil makes the world go round, or at least lubricates it.
At the beginning of 2016, a minor war broke out between two intellectual camps: one said that as a result of the collapse in energy prices, the US economy would slide in a recession as the bulk of the states responsible for job gains under Obama were the same ones that would get crushed with oil plunging. The opposing camp – which boasted Janet Yellen at one point – vociferously claimed that sliding oil prices are great for consumers and with thanks to the extra purchasing power, the US would not only avoid a recession but prosper. One year later we look back to see which, if any, of the two camps was correct.
As it turns out, the truth was in the middle, because while the US in total may have avoided an economic contraction (at least according to the NBER), numerous states did in fact enter a recession.
Based on new research by Kansas Fed Economist Jason Brown, several states suffered severe downturns as of the third quarter of 2016 that hampered growth nationwide. According to the report, Kansas, New Mexico, Oklahoma and Wyoming experienced recessions last year, while others saw milder contractions, including Maine, Montana, North Dakota, Louisiana and West Virginia.
As noted first by Bloomberg, Brown said a ripple effect from the decline in commodity prices hit the oil- and coal-dependent states particularly hard, leading to economic contractions as local governments such as Oklahoma cut back on spending.
The findings also underscore the growing sense of economic inequality in the nation, as data compiled by Bloomberg show states like Washington and Massachusetts grew well above the national average last year. They saw employment climb as joblessness expanded in Louisiana, Oklahoma, Wyoming, North Dakota and Alaska.
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