Red State Economies Are On The Rise. NewsWire

NewsWire: 7/15/22

• In general, red states have recovered faster than blue states from the economic effects of the pandemic. People have flocked to red states for cheaper housing and lower taxes. (The Wall Street Journal)
• NH: In April, we covered a WP op-ed that argued economic factors were driving Americans to migrate to GOP areas. (See “Why Americans Are Moving to the Red Zone.”) Now here comes a WSJ piece that similarly argues red states have economically recovered from the pandemic faster than blue states. Let’s explore the evidence.
• Red states have added more jobs. By May 2022, according to a Brookings analysis of BLS data, blue states were still down -1.3M jobs from the February 2020 level, but red states had added +341K jobs. Red-zone jobs grew by over +0.5 pp since the pandemic began, while blue-zone jobs fell by at least 3x that percentage.
• This labor growth is partly due to major companies moving their headquarters to red states. Citadel is moving from Illinois to Miami. Caterpillar (CAT) is moving from Illinois to Texas. Anecdotally, many privately held firms are moving from California to both Texas and Florida.
• Moody’s Analytics has created a “back to normal” index based on 13 inputs like unemployment, retail sales, and the housing market. Of the 15 states with the highest readings in mid-June, 4 were blue states, and 11 were red. Of the ten states with the lowest readings, two were red, and eight were blue. (See "The Macro Show: July 13.") 

• Americans are also continuing to migrate to GOP areas. According to an analysis of zip code changes by Equifax and Moody’s Analytics, Texas, Florida, and North Carolina experienced the largest net in-migration during the 12 months ending in May 2022. California, New York, and Illinois recorded the largest out-migration. 

• Clearly, the economic momentum is within the red zone. But some analysts have argued that the overturning of Roe v. Wade will deter young people from moving to red states with restrictive abortion laws. IMO, this won't have much of an impact. Many of these states already had restrictive abortion policies, and people were still moving to these areas.

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