Forget about arguing over which state has the best business climate — which one is the most predictable in delivering economic performance?
Considering the many tensions of modern day life, I’m thinking most rational people would prefer a healthy degree of financial predictability with decent performance over the emotional roller coaster of booms and busts.
California’s economy has seen its share of economic upheaval and prosperity over the years as industries like aerospace, real estate, and technology created profitable upswings as wells as painful downfalls.
I fired up my trusty spreadsheet, filled it with curious indexes of state economic performance by the Federal Reserve Bank of Philadelphia, and set out to see how California compares with other states in terms of measurable economic sanity.
I used various parsings of year-over-year percentage changes in each state’s Philadelphia Fed index back to 1980, using both long-term and somewhat shorter-term yardsticks. To track relative consistency and output, I compiled overall predictability and performance benchmarks and, finally, a state-by-state risk-and-reward score.
Here’s my 11-step process to see how California scores for economic sanity.
Step 1: How often a loser?
Economic dips are bad for the wallet and your stomach lining. My spreadsheet tells me that since 1980, the nation was in some level of economic decline in 10.5 percent of months during the past 37 years. California? A disappointing downtime of 15.6 percent, or 29th rank amongst the states. Best was Georgia, down only 4.8 percent of the time. Worst? The poster child of the ailing Rust Belt, Michigan, with its business climate down 29 percent of the time.
Step 2: How deep a dive?
Nothing is more unnerving than a steep economic dive. California’s worst slide by this measure was a 6.1 percent yearly drop in mid-2009. That’s significantly deeper than the nation’s worst drop of 4 percent since 1980 and it ranks the state 23rd…