Recession risk gone in all US states but 1: Moody's Analytics

Wilmington Delaware
Image source: Johnny Stockshooter | Age Fotostock | Getty Images

All U.S. states except for Delaware have escaped the possibility of falling back into recession, as they reap the rewards of strong private-sector employment and a burgeoning energy sector, according to an analysis released on Tuesday.

Moody's Analytics, which tracks state and metropolitan economies, added Illinois, Wisconsin and Alabama to its list of states in recovery. That left Delaware alone in its "at risk of recession" category.

(Read more: America's Top States for Business 2013)

Moody's Analytics, a unit of Moody's evaluates economics and financial risk around the world. A separate unit, the credit ratings agency Moody's Investors Service, recently said the outlook for states is now stable, after five years of being negative.

"The labor market recoveries in those three states were lagging behind," said Moody's Analytics Associate Economist Brent Campbell.

(Read more: The 5% recovery: Why most are still in recession)

But over the last six months, private-sector jobs have grown in Alabama. Chicago, where the financial services sector is strong, is leading the Illinois economy into stable territory.

In Wisconsin, health care is driving the recovery, Campbell said. That sector is also helping other states, especially those with older populations.

From July to August, healthcare and social assistance gained 38,300 jobs, the federal government recently reported. Over the year from August 2012, the sector added 353,700 jobs.

Delaware has "just lagged behind the rest of the U.S. It's not necessarily performing poorly," Campbell said, noting he expects to move Delaware into the recovery column soon.

Natalie Cohen, managing director of municipal securities research at Wells Fargo Securities, said she was "not sure" about designating Delaware as being at risk of recession.

"Their employment growth looks okay and their finances are reasonable," she said.

In July, the latest month data is available, Delaware's jobless rate was 7.4 percent, the same as the national rate. Alabama's was 6.3 percent and Wisconsin's 6.8 percent. Illinois had one of the highest rates in the nation at 9.2 percent.

(Read more: Report: Household income below end-of-recession)

Moody's Analytics considers multiple factors alongside employment—mainly housing and industrial production—when assessing the business cycle in a state.

Currently no state is in recession, it found, and seven are in economic expansion.

Most of those in expansion, Alaska, Texas, Oklahoma, North Dakota, South Dakota, Nebraska, and Utah, are experiencing an energy boom led by natural gas. Campbell said other western states such as California and Washington are once again flourishing as the technology sector picks up steam.

The 2007-09 recession, the longest and deepest since the Great Depression, was fairly uniform across the states, sparing only North Dakota. The recovery, though, has proven uneven.

"The West and the South have led the recovery," said Campbell. "The Northeast is probably the farthest behind. That's been the story since the Great Recession."

By Reuters