The Philly Fed has released this month’s coincident index data for all 50 states today; here’s the print release.  We’ve had folks ask about the coincident index data every time we’ve posted the information; here’s a link to the Philly Fed web page explaining their methodology, and here are the essentials –

The Federal Reserve Bank of Philadelphia produces a monthly coincident index for each of the 50 states. The indexes are released a few days after the Bureau of Labor Statistics (BLS) releases the employment data for the states. The Bank issues a release each month describing recent trends in the state indexes, with special coverage of the three states in the Third District: Pennsylvania, New Jersey, and Delaware.

The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.

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.

Simply put, the “greener” the state on the map, the more robust the economy.  As we’ve noted in our data tracking total nonfarm job growth by state, Wyoming still leads the pack, followed by a corridor through “fly-over country”.  Indexes actually increased (read improved) in eight states last month. 

Emerging market investors - here’s another rather simple but useful roadmap to focus your efforts. 

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