How does Wisconsin compare with the U.S. and other states in recovering from the Great Recession?
This is a follow up to an earlier post evaluating my favorite adopted state’s progress in recovering from the recession. To answer this question I turned to the Federal Reserve Bank of Philadelphia which produces a monthly “coincident index” for each of the 50 states, combining four state-level indicators to summarize current economic conditions in a single statistic. The four state-level indicators are 1) nonfarm payroll employment, 2) average hours worked in manufacturing, 3) the unemployment rate and 4) wage and salary disbursements deflated by the consumer price index.
Using coincident indexes I produced the following graph summarizing economic trends in the U.S. versus Wisconsin, Minnesota, North Dakota and Iowa from January, 2007, to July, 2012.
Technical Description of How the Coincident Index is Created
The Federal Reserve Bank of Philadelphia explains how the coincident index is calculated:
“A dynamic single-factor model is used to create the state indexes. James Stock and Mark Watson developed the basic model for constructing a coincident index for the U.S. Theodore Crone and Alan Clayton-Matthews adapted the basic model for the states. The method involves a system of five major equations: one equation for each input variable and one equation for an underlying (latent) factor that is reflected in each of the indicator (input) variables. The underlying factor represents the state coincident index. The model and the input variables are consistent across the 50 states, so the state indexes are comparable to one another.”
The reason I picked the states in the comparison is totally personal. I lived in each of those states.