The New Midwest in Recession and Recovery

The revitalized Midwest economy has now been tested by a lengthy period of economic weakness. A recession began in mid-1990 and appeared to have bottomed out in April 1991. Since then, economic activity has slowly moved upward, but not without faltering late in 1991. In the past, national economic slowdowns have been harsh on the Midwest. During the 1981-82 downturn, for example, over 1.3 million people lost their jobs in the region. Most of this decline came in the manufacturing sector, where payrolls plunged by 25%, twice as fast as the national average. In the most recent recession and recovery, however, the Midwest economy behaved relatively well. In large part, this has been due to the fact that its manufacturing sector - the cornerstone of the Midwest economy - has fared better than its national counterpart since the recession began. This Fed Letter explores two key aspects of the relatively strong performance of the Midwest manufacturing sector during the recent recession and the subsequent recovery, using the Chicago Fed's Midwest Manufacturing Index (MMI).