The Great, Greater, and Greatest Recessions of US States

This paper examines state-level differences in the timing, depth, and total employment effects of the Great Recession. It finds that several states were in recession prior to the official start of the recession, while more than a dozen states didn’t enter recession until six months or more after it. States’ exits from recession were similarly staggered. As a result, 11 states’ recessions were one year long or shorter, while the recessions for five states were at least 24 months long. Further, there were geographic patterns to the spread of the recession across states. I use these state-level estimates to introduce a new approach for calculating the total effects of recessions on state employment, one that accounts for lost employment growth as well the decrease in employment. States formed distinct geographic groupings according to these total effects, with states in the West and Southeast tending to have seen the greatest harm. Finally, many of the state-level differences in the effects of the Great Recession were related to differences in industry mix and the prevalence of sub-prime mortgages. The states with the longest and deepest recessions also tended to have been those with the highest shares of subprime mortgages