During their State of the State addresses earlier this year, many governors took the opportunity to remind the public of just how far their economies have come since the recession. New York’s Andrew Cuomo mentioned his state’s declining unemployment rate and record number of private-sector jobs. New Jersey’s Chris Christie cited the creation of 278,000 jobs since he took office in 2010. New Mexico Gov. Susana Martinez said an uptick in manufacturing and tech jobs was a “direct result” of recent business-stimulating reforms.
Governors claim credit for positive jobs reports and get blamed when the numbers aren’t so good. But in reality, myriad factors affecting job growth are beyond their control. National and global economic shifts greatly influence job gains and losses, along with the performance of a state’s industries.
Published research doesn’t offer any consensus on the degree to which governors generate growth across a state’s economy, but it’s certainly less than they give themselves credit for, at least in the short term. A cross-section of economists interviewed speculated that governors are generally responsible for just 5 to 10 percent of changes in total employment over a four-year term. “In the short run, their effect is quite limited,” says Edward Glaeser, a Harvard University economist. “Most of the things that affect a state’s economy are way beyond a governor’s control.” Examples might include housing booms, aging populations and large fluctuations in commodity prices.
The performance of a state’s major industries plays an even greater role in driving job totals up or down. This was particularly evident in the oil and gas boom that provided a boost for several governors’ economic claims during the past few years. Over the first four years of former North Dakota Gov. Jack Dalrymple’s administration, from 2010 to 2014, employment jumped a staggering 22 percent. But then oil prices dropped, and over the last two years of his term that ended in December, total employment declined more than 5 percent. “Relative to the business cycle,” says David Neumark, an economist at the University of California, Irvine, “governors’ policies are trivial.”
No one disputes that the national economy affects state job growth, but the extent of the linkage varies. Illinois, for example, maintains a fairly diverse labor market, so its economic measures have closely tracked national rates for decades. By comparison, states more reliant on one or two sectors, such as energy or agriculture, don’t mirror the country as much. Farm states weathered the recession much better than others. And states that lean on manufacturing jobs are typically more prone to job losses resulting from matters overseas. After all, governors clearly can’t dictate global economic policy.
At times, governors may resolve -- or even create -- a crisis. During recessions, Neumark suspects their influence is greater, depending on the policies they pursue and how quickly they react. But even during downturns, states count largely on what happens in Washington. The federal government can inject significant investment into a state’s economy, as was the case with the American Recovery and Reinvestment Act in 2009. For their part, states don’t have the same ability to borrow huge sums of money, and their rainy day fund balances are insufficient to raise spending by very much. States that balance budgets by cutting spending suffer more immediate negative consequences than those raising taxes, says Timothy Bartik of the W.E. Upjohn Institute for Employment Research.
But in many cases, cities are the economic engines that drive states’ fortunes. And local leaders, Glaeser says, actually have more influence than governors do. They can, for instance, adopt land use regulations or other rules that encourage or inhibit growth. “Mayors are hands-on leaders,” Glaeser says. “They really can shape the local environment.” And some mayors preside over their cities far longer than the four or eight years most governors are afforded, allowing them to leave more of a lasting imprint.
Governors may have influence on their states’ economies, but they may not still be in office to see it. Over 15 years, Bartik estimates that a governor’s efforts could potentially be responsible for 25 to 30 percent of changes in a state’s employment. He cites education initiatives ranging from early childhood schooling to community college training programs. Business incubators or research grants may help over the long haul as well, even though they may not yield many jobs right away. “It’s not something where you’re going to be able to snap a finger and affect things in a couple years,” Bartik says.
Consider North Carolina’s famed Research Triangle Park, a science and technology center promoted by a succession of governors that welcomed its first companies in 1959. Growth was slow at first -- it took approximately 20 years for the park to employ 10,000 workers. Today, it’s home to more than 50,000 employees.
The public, though, desires more immediate results, often without consideration of other factors influencing a state’s economy. Research by economist Justin Wolfers suggests that while voters judge their state’s performance relative to the national economy, their assessments aren’t much more sophisticated than that. Voters in states with business cycles keyed to national conditions are prone to re-elect governors when the country’s economy is booming, then punish them during national recessions. Voters in heavy oil-producing states were similarly found to reward governors when oil prices climb, then vote them out of office when prices fall.
So perhaps it’s natural that while their policies affect states mostly over the long term, governors typically tout the short-term gains that voters want to hear about. “Politicians tend to be short-term-oriented,” Bartik says, “because the voters are short-term-oriented.”
State Unemployment Rates
Similar state economies in the same regions often mirror one another. Each marker shown represents a state’s monthly unemployment rate.
Farm category: ID, IA, KS, MN, MT, NE, ND, OK, SD, VT, WY. Rust Belt/industrial category: IL, IN, KY, MI, NJ, NY, OH, PA, RI, WV, WI. Sun Belt category: AL, AZ, AR, CA, FL, GA, LA, MS, NV, NM, SC, TN, TX.
SOURCE: BLS monthly unemployment rate data