• Our Favorite ETF Ideas: Get 30-Days Free

    Get 1-month of completely free access to “ETF Pro Plus” – our Macro team’s monthly strategy note distilling our macro investment research down to our favorite ETF exposures.

Editor's Note: Below is a brief excerpt from a complimentary Health Policy Unplugged note written by our Health Policy analyst Emily Evans

Health Policy Unplugged is Hedgeye's newest Unplugged Product; click HERE to learn more about Emily's research process and the analysis subscribers receive.

Politics, Policy & Power | Are Regional Economic Differences Making a Comeback?  - 6 7 2021 12 37 49 PM


A million years ago, say around 1984, before bond insurance and before off-shoring and globalization homogenized the American economy, the municipal bond market offered its own quirky view of regional differences.

Through ratings and frequently price - when Moody’s view did not match the collective opinion of Harry’s of Hanover Square’s best customers – the market expressed what everyone knew or thought they knew.

Southern states often traded cheap to their northern brethren, reflecting a greater dependency on agriculture and less robust tax bases. Memphis was punished for less than ideal fiscal management while Nashville was rewarded. Since no one was quite sure the money would be there when the bills came due, everything in Louisiana was cheap.

For the last 40 years, save the occasional oil boom/bust or financial crisis, unemployment in what are now the largest states that have come to define our economy and our politics, moved in tandem.

Politics, Policy & Power | Are Regional Economic Differences Making a Comeback?  - Slide1

Until the pandemic, no more than 0.40% on average has separated New York’s unemployment rate from Florida’s. The difference between California and Florida, two states with similar economies dependent tourism, agriculture and international trade, has on average been 1.20%.

Texas’s oil economy makes comparisons more difficult. Nonetheless, until March 2020 the gap between Texas’s unemployment rate has and California’s has averaged 1.20%. The comparison with New York is 0.50%

April’s unemployment rate, the first month of normalization post-COVID, shows the gaps between Florida and California and Texas was 3.50% and 3.40%, respectively. Between Texas and New York, the gap is 1.50% and with Texas 1.60%.

It remains to be seen if these anomalous differences persist. What we know about unemployment is the longer it lasts, the harder it is to shake off.

By fall, when enhanced unemployment is expected to lapse in those states that did not terminate it early, the pattern should be more evident, but things do not look promising.

The persistence of differences in regional and local economies spells political trouble for those states experiencing a slow recovery. Comparative unemployment rates are hard to argue with.

Confounding recovery, even a slow one, will be labor migration as people needing jobs go and find them across state lines. Labor gets more expensive, prices go up. Wash, rinse, repeat. 

It probably won’t bring back the bond daddies, but the American political economy might get more interesting.

Politics, Policy & Power | Are Regional Economic Differences Making a Comeback?  - Slide2


As regional differences emerge, some of them unflattering, public health policies widely regarded as right and just by political leaders a few weeks ago are being shoved aside with amnesiac aplomb.

On May 28th CDC reversed, after about a month and widespread criticism, guidance for mask wearing at summer camps. Friday, the New York Department of Health’s Director wrote to Dr. Rochelle Walensky, pointing out inconsistencies between guidance for schools and summer camps and informed her that we he was going to adopt the more liberal camp standard for all New York state schools.

The inconsistent nature of certain COVID-19 related policies that most people across the world endured for a variety of reasons are being tested in a way that may be affecting certain political opportunities.

For example, in call for a return to in-person instruction this fall, the American Federation of Teachers had argued for safety protocols that included masks, surveillance testing, ventilation and most important, social distancing. Social distancing of course, requires smaller class sizes, a long-standing goal of the union.

In a letter to Dr. Walensky in May, the AFT expressed concern that teachers might not feel safe if all mitigation measures are lifted suggesting that outcome is now possible.

Friday, AFL-CIO President Richard Trumpka called out the president for delayed guidance on COVID-19 workplace standards. He and affiliated unions were optimistic that new emergency guidance, the first of its kind in a generation, would positively enhance working conditions.

The United Food and Commercial Workers Union has been lobbying for slower line speeds at food processing plants, as one example.

Trumpka knows that time is not on his side. If some policies imposed in the name of public health can be terminated, all of them are up for reconsideration.

Surveillance testing of low risk asymptomatic individuals may be next. Jon Rahm’s forced withdrawal from the Memorial Tournament with a six stroke lead after testing positive for COVID-19 seems grossly unfair, especially to those of us who spent much of the pandemic on a golf course.

Politics is all about seizing opportunity and for the AFT and AFL-CIO the grip may be slipping.


In the fall, as enhanced unemployment ends, Campaign 2022 will be ramping up. Early signs point to pandemic response becoming a central theme augmented, by related issues that have emerged to exploit the crisis.

As luck would have it, minorities and the working class will be the battleground for votes between the two parties. These groups also happen to be people who have been disproportionately affected by COVID-19 itself and by the restrictions placed on businesses and other activities.

How pleased these groups are with the COVID-19 response and efforts to “reimagine” the American economy through childcare, education, home health care programs and other priorities of the White House will determine the last phases of the federal COVID-19 response.

The situation is unpredictable.

As competing theories of COVID’s origins unfold, scientists who opposed one-size-fits-all lockdowns find their voice and regions of the country struggle with an economy that has different priorities, it seems impossible to know how critical parts of the electorate will respond but it seems unlikely to favor the current trajectory.