From: Ernie Goss, Ph.D./Institute for Economic Inquiry
To: Scott Jenkins,
Subject: Economic Trends - November 2014: Divided Government and Economic Performance by Political Party
Date: Wed Nov 19 15:30:24 MST 2014
Economic Trends 
November 2014  | Creighton Institute for Economic Inquiry  

Welcome to our November report covering Creighton's October survey results. Creighton's monthly survey of supply managers and procurement experts in nine Mid-America states indicates the economy is growing at a positive pace but much slower pace with inflationary pressures declining. Creighton's monthly survey of bank CEOs in rural areas of 10 states points to slower growth in the months ahead for areas dependent on crop production and energy.     

Professor Ernie Goss

Professor Ernie Goss, Ph.D.
Creighton University
Jack MacAllister Chair in Regional Economics

From the Desk of Ernie Goss

Divided Government and Economic Performance:

Evidence from the States 

The 2012 elections saw a significant decline in the number of state governments with executive and legislative powers divided between Democrats and Republicans.

Between 2012 and 2014, only 13 states were split, while 14 state governments were governed solely by Democrats, and 23 states led by Republicans-the lowest number of states with divided governments since 1952, when there were only 8 splits.

Did states with split governments economically outperform those with unified power? Over the last 2 years, GDP growth of 2.9% for split states lagged behind the 3.5% growth for Democrat states and the 3.7% growth for Republican states. During the same time period, wage growth for split states increased by 6.9%, behind both Democrat states with 8.1% and Republican states with 7.8%.

Likewise, the past 2 years saw private job expansion in split states of 2.6%, with Democrat states expanding jobs at the rate of 3.7%, and Republican states growing jobs at a rate of 3.9%. In terms of 2013 state and local tax burdens, of the 10 states with the lowest tax burdens, 3 were split states, one was Democrat-led and 6 were led by Republicans.

Similarly, in terms of expanding the size of state and local government as measured by state and local government wages, Democrat states expanded by 5.8% and split states climbed by 3.2%, while Republican states rose by a smaller 2.9%. Thus, Democrat states appear to clearly expand the size of state and local government, along with the accompanying tax burden, while Republican states clearly grow the size of state and local government and the related tax burden at a slower pace. Split states fall somewhere between Democrat and Republican states.

As data in this essay indicate, the political party composition of a state's executive and legislative branches, whether unified with Democrat or Republican leadership, or governed by split branches of government, influences economic performance and the state and local governments' size.


Read more articles on Professor Goss' blog Economic Trends.
Mid-America & Rural Mainstreet Indicators Graph 

Mid-America Region
Growth Slows for Mid-America for October: Downturn in Hiring and Export Orders

October survey results at a glance: 

  • Leading economic indicator down.
  • New export orders decline.
  • Businesses cut employment for October.
  • Average wage gain of 1.6% expected for next year.
  • Wholesale pressures remain modest for the last several months.
Rural Mainstreet 

Index Plummets:  

Farmland Price Index Sinks to Record Low


October survey results at a glance:

  • Rural Mainstreet Index fell for the fifth straight month to its lowest level in more than four years.
  • Farmland prices declined for the 11th straight month, while the index sank to a record low reading.
  • On average bank CEOs expect farmland prices to decline by 5% over the next year.
  • For a third straight month farm-equipment sales declined to a record low level.
  • Bankers reported no change in share of farmland sales financed since June of this year.
The Outlook


Professor Goss (November 2014):  

  • Well, I was dead wrong on my Q3 GDP growth forecast. I expected 2% or less, and it was above 3%. There is too much weakness in the farm and energy sectors to expect Q4 growth numbers to come in above 2% or even close to Q3 growth.
  • I expect housing prices growth to continue to move lower, but remain positive.
  • Part-time job creation will continue to be a big part of U.S. employment growth.
  • Nationally, this will be the best holiday shopping season since 2007. 

National Association of Business Economics (NABE):

  • "Business conditions continued to improve during the third quarter, albeit at a marginally subdued pace from that of the second quarter, and the majority of the NABE Business Conditions Survey panelists report strong expectations for continued economic growth," said NABE President John Silvia, chief economist for Wells Fargo Securities. "Results from NABE's October 2014 Business Conditions Survey suggest that growth is continuing at a majority of survey respondents' organizations, with an increasing number of panelists also reporting employment growth and less difficulty in filling open positions. The number of respondents reporting increasing profit margins at their firms fell only slightly. There continues to be little change in the share of respondents reporting higher materials costs in the third quarter or expecting higher costs in the fourth quarter. A growing share of respondents does report that they expect future price increases at their firms as the economy continues to strengthen. The majority of respondents expects the economy to continue to grow in the 2-3 percent range."
  • The U.S. economy added 214,000 jobs in October and the unemployment rate ticked down to 5.8% from 5.9% in September.
  • As tax revenues increased and spending cuts took effect, the 2014 budget deficit dropped to the lowest level in six years.
  • Third quarter GDP growth (annualized) came in above 3.0%. While not vigorous, it is better than we have been seeking.

Bad News

  • Overall, wages were up 2% for the 12 months ended in October. That was a bit better than the 1.7% inflation rate, but not nearly enough growth to make up for the ground lost during the Great Recession.
  • The S&P/Case Shiller composite index gained 5.6% in August over last year, the slowest year-on-year increase since November 2012.
  • Although the number of people out of work six months or longer has fallen 28% over the past year, some 3 million can't find a full-time job. That's still higher than anytime before the 2007-2009 recession.
Calculator Newspaper - image by Nick Benjaminsz
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Supply Manager Report

* Arkansas 
* Iowa 
* Kansas 

* Minnesota  

* Missouri    

* Nebraska  

* North Dakota   

* Oklahoma

* South Dakota


Read state-by-state, six-month projections by supply managers from nine states surveyed regarding current economic conditions in their communities. 

   More Videos 
with Professor Goss 

Goss Eggs

Goss Eggs 
Recent Dumb  
Economic Moves 

Senators Harry Reid (D. NV), Dick Durbin (D. IL) and Mike Enzi (R, WY) have led a bipartisan coalition in the U.S. Senate to force online merchants to collect sales taxes on tens of thousands of items. If passed this bill would bury small online suppliers who could not afford the audits and other compliance measures that would ultimately be required.



What To Watch 

Image - Glasses Newspaper



Home Price Index:

On the last Tuesday of the month, the Case-Shiller home price index will be released. Another significant decline in the growth number will be a warning signal for the housing market. Year over year growth above 5.0% but below 7% will be healthy indicator.

 _ _ _   


 Wage data:  

On Friday Dec. 5, the Bureau of Labor Statistics, as part of its employment report, releases its wage number. Year over year growth of 2.0% or less will encourage the Federal Reserve Bank to keep short term interest rates low until the middle of 2015. Above 2.0% could be an early warning signal of rate increases earlier than that time.    

_ _ _



On Friday Dec. 5, the U.S. Bureau of Labor Statistics (BLS) will release the employment report for November. Another strong report (job additions above 200.000) will push the Fed to raise interest rates sooner than expected.  




Ernest Goss, Ph.D. · Institute for Economic Inquiry

Creighton University · 2500 California Plaza · Omaha NE · 68178

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Institute for Economic Inquiry | Creighton University | 2500 California Plaza | Omaha | NE | 68178