12 states posted lower ‘08 GDP

Economic output in 2008 slowed in 38 states as downturns in manufacturing, construction and financial services exerted themselves across the nation in a presidential election year.

Growth in gross domestic product by state slowed sharply last year, falling from 2 percent in 2007 to 0.7 percent in 2008, the Commerce Department reported Tuesday. Last year represented the fourth year in a row when the growth rate of GDP by state continued to decline from its cyclical peak of 3.5 percent in 2004.

Twelve of the 38 states experienced outright declines in GDP last year.

GDP fell in four of the nine states whose electoral votes switched from President Bush in 2004 to Barack Obama in 2008, including Florida and Ohio, the two largest states that shifted their votes. Indiana, whose economy is smaller today than it was in 2004, voted for a Democratic presidential candidate last year for the first time since 1964.

Nevada also flipped into the Democratic column last year, as did North Carolina, whose GDP increased by just 0.1 in 2008 and 0.7 in 2007 after expanding by an average of 5.2 percent in 2005 and 2006.

Only three of the 12 states experiencing a decline in GDP last year voted for John McCain, the Republican presidential candidate. They were his home state of Arizona, Georgia and Alaska, home of his vice presidential candidate.

The recession, which began in December 2007, has clobbered many states with big manufacturing sectors.

“In too many cases, the parts of the economy capable of promoting genuine recovery from the economic crisis by increasing national earnings - principally manufacturing - shrunk from 2007 to 2008,” said Alan Tonelson, a research fellow at the U.S. Business and Industry Council, whose nearly 1,900 members are mainly small- and medium-sized domestic manufacturers.

“And in too many cases, the parts of the economy that can fuel little more than bubble-ized growth and higher debt levels - principally government and health care - grew during this period. So the new data indicate that at the end of 2008, the U.S. economy was farther away from regaining its health than at the end of 2007.”

The GDPs of Michigan, Ohio and Indiana all contracted because of declines in durable-goods manufacturing, such as autos. Michigan’s economy shrank for the third year in a row.

Many of the biggest declines occurred in states where housing has swung from boom to bust. “Arizona, Florida and Nevada experienced faster growth than average in 2004, 2005 and 2006, but their economies slowed in 2007 and declined in 2008,” largely because of the bursting of the housing bubble, the report said.

Florida’s economy contracted by 1.6 percent last year after being flat in 2007. The GDPs of Arizona and Nevada dipped 0.6 percent last year.

Alaska’s 2 percent decline, the nation’s largest, was due to falling petroleum production. California, helped by strong gains in the high-tech sector, “eked out a 0.4 percent gain in 2008, which is surprising given the extent of the housing slump and current struggles with the state budget,” said Mark Vitner, senior economist at Wachovia Economics Group.

States relying on agriculture, forestry, fishing, hunting and/or mining, such as North and South Dakota, Iowa, Kansas, Wyoming, Colorado, New Mexico and Texas, experienced the strongest gains in GDP last year. All their economies grew by 2 percent or more.