America in recovery: Why some regions are faring better than others

June 15, 2021 – The U.S. economy is still recovering from a short, but very sharp recession in early 2020. Unlike previous recessions, this downturn was not caused by a breakdown in a particular industry, but a widespread shock that rippled through the entire economy, with some industries hit much harder than others. While the effects of this recession were felt nationwide, the depth of the downturn and pace of the recovery have diverged significantly by state. This has large implications for issuers and merchants, since their regional footprints will determine how quickly they can expect their businesses to recover.

According to our analysis, states with lower restrictions and higher employment in essential industries (i.e. construction and manufacturing) have had the lowest gross domestic product (GDP) and employment declines caused by the pandemic:

• The East South Central and Mountain West census divisions have been the quickest to recover, as these areas include states that have, in general, higher employment in essential industries. Their lockdown policies were also less strict during the pandemic than the rest of the nation.
• Our forecasts suggest the South will recover the quickest to the pre-pandemic level of gross state product (GSP) (map above), while the Northeast will recover the slowest due to higher restrictions and greater dependence on non-essential industries.

Highlights:

• The pace of recovery will vary widely by region
• Employment in essential industries and variation in COVID restrictions will determine each state’s recovery
• Vaccine distribution will impact the pace of recovery significantly

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Policy and employment dynamics that influence the recovery

There is a clear correlation between stringent COVID based lockdown policies (as measured by the Oxford University Stringency Index) and lower per capita COVID infection rates.

• Our analysis indicates the total case rate per capita at the end of 2020 was higher in states that had lower average index levels, meaning less restrictive.
• There is no relationship between per capita COVID rates and employment growth. That is because lockdown policies are public policy decisions that weigh both health and economic outcomes.

States impose restrictions to combat the pandemic, and thus some states weigh fighting the pandemic more heavily than others that are more sensitive to how those restrictions could hurt their state’s economy. 

• There is a high correlation between the Stringency Index and employment growth, with employment contracting more in areas that are more restrictive. States that fared better in 2020 were generally less restrictive in their COVID policies and tended to be concentrated in the Mountain West and South.

Vaccine deployment is another important factor

Most states have administered at least one dose to 30 percent of their residents, but eight states are still below 30 percent (Alabama, Georgia, Idaho, Indiana, Mississippi, South Carolina, Tennessee and Wyoming) as of the date of this publication. Not only are there differences in how states administered the vaccines, but also how they adjusted their lockdown policies in response to the vaccine deployment. For example, Hawaii has the second highest vaccination rate in the nation (67% percent of the population has received at least one dose) and is ranked the highest on the Stringency Index. In Texas, on the other hand, only 44 percent of residents have received at least one dose, but the state has largely done away with restrictions and canceled the statewide mask mandate.

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Forward-Looking Statements

This report contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements are generally identified by words such as “outlook,” “forecast,” “projected,” “could,” “expects,” “will” and other similar expressions. Examples of such forward-looking statements include, but are not limited to, statements we make about Visa’s business, economic outlooks, population expansion and analyses. All statements other than statements of historical fact could be forward-looking statements, which speak only as of the date they are made, are not guarantees of future performance and are subject to certain risks, uncertainties and other factors, many of which are beyond our control and are difficult to predict. We describe risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, any of these forward-looking statements in our filings with the Securities and Exchange Commission (SEC). Except as required by law, we do not intend to update or revise any forward-looking statements as a result of new information, future events or otherwise.

Disclaimer

Studies, survey results, research, recommendations, opportunity assessments, claims, etc. (the ‘Statements’) should be considered directional only. The Statements should not be relied upon for marketing, legal, regulatory or other advice. The Statements should be independently evaluated in light of your specific business needs and any applicable laws and regulations. Visa is not responsible for your use of the Statements, including errors of any kind, or any assumptions or conclusions you might draw from their use.