States and Cities Impact On GDP

We get the first revision of GDP tomorrow morning at 8:30am. The export portion of GDP showed big improvement, thanks to the still
free-falling dollar. Unless the data in everything else fell apart,
that should bump GDP up to 1.0 – 1.25% (ex-inflation).

While that is brewing, it might be interesting to look at how States & Cities expenditures are doing. The State and Local Government consumption, expenditures and investment account for ~12.5% of GDP.

Consider the Personal Income tax, Corporate tax, Sales tax, and total Tax Revenue for a State:

1) State Income generally peaked in 2005, and has been decelerating since;
2) Only State Corporate tax receipts has turned negative on a YoY basis;
3) During the Recession of 2001, negative year over year revenue lasted as little as 1 quarter (sales tax) to 8 quarters (personal income tax);

If this cycle is even remotely similar to the mild recession of 2001, we are still in the first or second innings.

The chart below provides some insight:
click for ginormous chart

chart by Jake

Print Friendly, PDF & Email

What's been said:

Discussions found on the web:
  1. Bruce commented on May 28

    This is a little off subject, but maybe Barry will allow it…I am old enough to remember the first oil embargo…and how investments can change overnight….when the embargo took hold, everyone felt like they do today…that alternate sources of energy were right around the corner….well, XOM was way early to the party and invested big bucks in oil shale production in the Rocky Mountain area…but the embargo ended and they wound up selling much of the equipment they’d just bought for pennies on the dollar…check it out..

    I bring this up because I like this site, and the price of oil has broken now for a few days…not much, but maybe 10% or so from the high…now the Saudis are not stupid and when they let the price of oil fall after the first embargo, poof….alternative investment ideas dried up overnight…the smartest thing the OPEC countries could do here is increase production and try to drive down the price of oil for 6 months or so…and the alternative energy horse would throw a shoe just like it did in the 70’s…just a thought for when you are drinking your cup of coffee and figuring out how you are going to invest in the near future….

    Bruce in Tennessee

  2. Michele Gambera commented on May 28

    Is there data for the 1990-91 recession? Revenue (except for corporate tax) seemed positive in Q4 of 1992.

  3. Jim Haygood commented on May 28

    If everything else is held constant, strengthening export data implies that the original flash GDP report of +0.6% will be revised upward to 1.0% or so.

    But it’s still nonsense, because the GDP deflator used in the report is wrong; all wrong. It’s about two or three percentage points too low; accordingly, real growth is pegged two or three points too high. Current GDP growth is about negative two percent, in my estimate.

    Don’t just take my word for it. Check out the great story in the San Francisco Chronicle about economist John Williams, who says the government’s statistics are a reeking load of hog manure:

    Let me hereby register, in advance, my scathing, table-thumping repudiation of tomorrow morning’s GDP report. Lies … all lies!

  4. Damian commented on May 28

    Where can I get this data?

  5. Jake commented on May 28

    Damian: click through on my name and click the link below the chart to get the data.

Posted Under