Saturday, January 9, 2010

The Debts of the Spenders: 50 States of Disunion?

*With credit to Jeff Bernstein of Urban Digs.

I have added a few of my own comments below in the last section.

So, just how bad are individual state finances in the USA? See for yourself here and here.

According to the National Conference of State Legislatures "Ironically, a contributing factor to future state budget gaps is the end of federal stimulus funds provided by the American Recovery and Reinvestment Act (ARRA). Those additional funds supported state budgets in FY 2009 and, to an even greater extent, in FY 2010. That money recedes in FY 2011 and, when it is gone, will leave big holes in state budgets—what many state officials are calling the “cliff effect.”"

Despite this bearish data ISM data is improving. And the numbers have been growing steadily for the past few months of 2009. In fact, we are already back to 2006 levels!

I am going to say a few heretical things here. Long time readers will note a departure from the traditional bearish tone on unemployment and personal consumption which are lagging indicators. But we've got bullish data coming in from inventory re-stocking. Of course a lot of this is federal money but it looks like Keynesian spending may work - short term at least. Let us also not forget the Census 2010 hiring spree ongoing. It's going to give a big bump to NFP in Q2.
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