According to data on real gross state product released by the US Bureau of Economics (BEA), the growth rates of the Northeast and Mid-Atlantic regions have lagged behind other regions of the US. Growth for the US over this period was 8.4% versus 6.4% for the Northeast and 5.6% for the Mid-Atlantic region. The Mid-Atlantic, defined as Delaware, Maryland, New Jersey, New York, Pennsylvania, and the District of Columbia, had the slowest growth rate; consequently, it has slipped from first place in real gross domestic product per capita in 2009 ($55,786) to second place in 2013 ($57,866) and the Northeast has moved up from second to first ($55,312 to $57,986). National real GDP per capita was $46,706 in 2009 and $49,115 in 2013 according to the BEA.
Private sector real GDP has expanded 9.9% whereas government real GDP has slightly contracted 1.3% nationwide according to the BEA. Government is an important sector in every region, comprising between 10% and 14% of gross regional product and not more prominent in the Mid-Atlantic relative to other regions. Moreover, it has contracted only modestly in the Mid-Atlantic (-1.5%) so this is not a major reason for the Mid-Atlantic’s malaise.
More insight is gained from the BEA’s breakdown of private goods-producing industries versus service-producing industries. Nationwide, growth has been stronger in goods-producing industries (11.8%) compared to service-producing industries (9.4%). This growth has largely favored the western and central regions of the country relative to the eastern regions, except for the Far West which grew only 3.4%. However, even among the eastern regions, the Mid-Atlantic region has performed poorly; its goods-producing industries shrank -0.6% compared to growth in Northeast (4.6%) and the Southeast (7.4%). Growth in service-producing industries has also favored the western and central regions. In the Mid-Atlantic these industries have done better (8.0%) relative to the Northeast (7.6%) and Southeast (7.7%) but still below the national average.
Next we look at how growth fared with the most dominant industries: Manufacturing (12.0% share of GDP nationally), Finance, Real Estate, Insurance (20.1%), Professional and Business Services (11.6%) and Education and Health Services (8.5%). Professional/Business Services is a catchall category that includes legal services, temp agencies, scientific services, waste management, computer design, etc. For the Mid-Atlantic, Finance (24.5% share of gross regional product in 2009), Professional/Business Services (13.3%) and Education/Health Services (9.5%) are relatively more important than Manufacturing than for other regions but Manufacturing is still important (8.0% share of gross regional product in 2009).
The Mid-Atlantic’s growth rate 2009-2013 has been best in Finance and Professional/Business Services (6.4% and 12.6%) relative to the national average (6.9% and 14.5%), the Northeast (5.2% and 15.3%) and Southeast (5.6% and 12.1%). The Mid-Atlantic’s Education/Health Services growth (4.8%) was below average both nationally (6.3%) and regionally (Northeast’s 5.4% and Southeast’s 6.0%). The real outlier is manufacturing, however. The Mid-Atlantic’s manufacturing sector shrank -5.5% relative to the 12.9% growth over 2009-2013 nationally, and the 4.2% growth in the Northeast and 11.3% growth in the Southeast.
The bottom line is that there has been a nation-wide shift toward goods-producing industries whereas the comparative advantage of the Northeast and Mid-Atlantic regions is in service-producing industries. This shift is possibly due, in part, to the gradual depreciation of the trade-weighted value of the dollar since 2002, notwithstanding its temporary spike during the financial crisis of 2008-2009 (Federal Reserve Bank of St Louis). Such a depreciation typically benefits export-oriented industries in the interior of the country (albeit with long and variable lags) relative to the coasts, which are more import-dominated.
However, this is not a complete explanation for the Mid-Atlantic region’s slow growth. Even the Northeast, Southeast and Far West regions have shared somewhat in the growth of goods-producing industries, including manufacturing, whereas in the Mid-Atlantic region these industries contracted. This loss has not been offset by regional growth in service producing industries which have hovered around the national average. Causes specific to goods-producing industries, i.e., manufacturing, and the Mid-Atlantic region, explain this contraction.
