Minnesota’s fall in GDP so far in 2020 is worse than the U.S. average
On October 2nd, the Bureau of Economic Analysis (BEA) released its Gross Domestic Product (GDP)numbers by state for the second quarter of 2020, which runs from March to June. This was the high point of the Covid-19 pandemic, at least here in Minnesota. The numbers were expected to be bad, and they were.
For the United States as a whole, GDP shrank by an annualized rate of 31.4%, which means that that is how much GDP would decrease if that rate continued for a full year. The District of Columbia fared best, with a decline of ‘only’ 20.4%, and Nevada and Hawaii were hardest hit with falls of 42.2%. Minnesota’s GDP shrank at an annualized rate of 31.3%, as Figure 1 shows, ranking us 26th worst affected state in the second quarter of 2020.
Figure 1: Change in GDP, annualized, Q1:2020 to Q2:2020
Source: Bureau of Economic Analysis
How have the states done since the start of the pandemic?
Figure 2 shows how much GDP in each of the states and the District of Columbia has fallen by since the fourth quarter of 2019, the last one before Covid-19 hit. This is not on an annualized basis, this is the actual hit to GDP over this period. Again, we see that the District of Columbia has fared best with a fall of ‘only’ 5.8% and that Hawaii has been hit hardest, with a decline of 14.8%. For the United States as a whole, the fall has been 10.1%, and Minnesota has actually done slightly worse than this with a decline of 10.6%, making us the 32nd worst-hit state.
Figure 1: Change in GDP, Q4:2019 to Q2:2020
Source: Bureau of Economic Analysis
These are all pretty awful numbers. Even the ‘good’ numbers seen by the likes of the District of Columbia would be bad in almost any other context. We must hope for a strong, rapid recovery and there is reason for optimism here: The GDPNow estimate from the Federal Reserve Bank of Atlanta forecasts, at present, growth of a massive 34.6% for the third quarter. The BEA will release its estimate on October 30th.
John Phelan is an economist at the Center of the American Experiment.