Weekly Wrap: Fed Report Doubts Energy States Will Recover First
By Stephen C. Fehr, Staff Writer
A new report from the Federal Reserve Bank of Kansas City knocks down a perception that energy states could recover from the recession faster than non-energy states.
The report, by Mark C. Snead of the bank's Denver office, says that energy states typically enter recessions late and exit early as energy prices recover along with the rest of the overall national economy. But he concludes that "continued weakness in natural gas prices suggests that a rapid recovery well ahead of the non-energy states seems unlikely in the current cycle."
Nowhere is that more true than in Oklahoma, which is confronting the worst budget crisis in modern history, according to The Oklahoman newspaper. The state has been battered by the decline in natural gas prices. Other major natural gas-producing states whose revenues have affected by low prices are Texas, Wyoming, New Mexico, Louisiana and Colorado.
Snead, the assistant vice president, branch executive and economist at the Kansas City Fed, does a nice job defining which states are energy states and how they have fared historically in economic downturns.
He identifies a "top tier" of energy states: Alaska, Louisiana, Oklahoma, Texas and Wyoming. The second tier is New Mexico, Colorado, West Virginia, Kansas, Mississippi, Montana, North Dakota and Utah. Snead says Kansas and Mississippi have limited exploration opportunities and are "slowly shedding" energy state status while Utah has all but lost its position. New energy states on the horizon with immense shale gas formations are Arkansas and Kentucky, the report says.
Though not all energy states are positioned to lead the nation in the recovery, several of them are financially stronger than non-energy states, especially Texas, North Dakota, Alaska and Montana. In fact, North Dakota and Alaska were the top two states in job growth during the recession.
President Obama may not get a warm reception from city officials when he visits Las Vegas in a few weeks. While in New Hampshire Tuesday (Feb. 2), Obama talked about the difficulties facing middle-class families saving for their children's education. "You don't blow a bunch of cash in Vegas when you're trying to save for college," the president said .
Those are fighting words in Las Vegas, a city that does not like to be called Vegas or be told people should not blow a bunch of cash there.
"I want to assure you when he comes I will do everything I can to give him the boot back to Washington and to visit his failures back there," said Las Vegas Mayor Oscar Goodman. Obama angered Goodman and other city officials last year when he bashed Las Vegas as a place where companies which receive federal bailout money should not visit "on the taxpayers' dime." Obama later apologized to Goodman and Senate Majority Leader Harry Reid (D) who hails from Nevada.
Meantime, Las Vegas was singled out as the only place in America still in recession by prominent economist Mark Zandi of Moody's Economy.com. Zandi spoke Wednesday (Feb. 3) to state policymakers, lobbyists and journalists attending Governing magazine's annual Outlook conference in Washington, D.C.
Zandi, who accurately predicted that the recession would end in mid-September 2009 at the same conference a year ago, offered a new forecast for the start of a sustained economic expansion: Feb. 11, 2011.
By the way, there is a new profile of Zandi called "The Hardest Working Man in the Recession," in the February issue of Philadelphia magazine.
Ben Schott, author and contributing columnist for The New York Times , has developed a cool chart listing credit ratings for foreign countries as well as states. "These ratings offer forward- looking opinions about risk — will a country be able to pay back its debts in full and on time?" he asks.
Headline of the week: "Watch state spend wildly at new web site," over a Chicago Sun-Times article about a civic group launching a Web site that keeps a tally on Illinois' debt.