America's Fastest- and Slowest-Growing State Economies

Every state posted GDP growth between 2000 and 2010, according to the latest U.S Department of Commerce data, which was released last week. The variation among the growth rates, however, was very wide. Michigan's GDP grew a little over 2%. Wyoming's nearly doubled. This wide range reflects the extent to which GDP improvement is good fortune much more than it is due to government planning or industrial policy. Factories close because of the worldwide economic slowdown while inclement weather can destroy crops.

The information shows how important the stability of just one or two industries in any state can be. Many of the states in the industrial Midwest lost manufacturing jobs, as would be expected. Most had slow population growth between 2000 and 2010 and a lack of economic expansion seems to have coincided with relatively low median income. States that lost major industries or where those industries were crippled were left with poorly paying jobs. The median incomes in Indiana, Georgia, Missouri, and Michigan are low and grew more slowly than wealthier states. The improvement over the ten year period amongst these states was usually strong.

The presence of natural resource may be the dividing line that separates the rapid growth states from the rest. Wyoming, North Dakota, Utah, and Alaska are all blessed with large deposits of minerals, oil, or crops. That may have hurt their economies briefly when oil prices were low. The surge in commodities values has helped them more recently.

The other salient point from the data is what a difference a few years can make. The Nevada economy has suffered as much as that of any other state in the last three years. Construction spending has collapsed with real estate prices. Tourism and gambling have also been badly hurt. Nevada's GDP grew 51% from 2000 and its population rose 35%. The state is better off economically than it was a decade ago, but that fact is certainly lost on the people who live and work there now. The Nevada real estate collapse may be bad enough that a recovery could take another decade.

Growth often looks better when it is from a small base. Among the states with the most rapidly growing GDPs are four of the eight least populated states. Their economies are small even when compared to weakened states like Michigan. A very modest growth in absolute GDP can translate into high double-digit growth. Absolute growth has to be remarkable to make the GDP growth rate of a large state top the national average. The only large state economy that was marked by that level of growth was Texas, the second largest state by GDP. The Lone Star state's GDP rose 52% between 2000 and 2010. The state's population increased 116% over the last four decades. Abundant natural resources and a strong higher education system brought people to the state who in turn took advantages of these advantages to drive even more rapid growth. Texas has a GDP of $1.1 trillion and its economic base is diversified over industries as widely apart as oil production, technology, and telecommunications. The state is home to 51 of the Fortune 500's headquarters. Its state university system is one of the best and largest in the nation. Texas is the template for all state growth both in terms of size and diversity. Natural resources over a number of decades have raised the fortunes of many companies. That, in turn, has helped the state educate its future workforce. That educated work force has brought more jobs across a broadly diversifying base.

Michigan is not as blessed as Texas. When the biggest industry that supported its GDP growth faltered, it had no resources to fall back on.

10. New Jersey

> Pct. Change in GDP: 27.2%
> Pct. Change in Population: +4.5% +4.5%
> Unemployment Rate: 9.3%
> Median Household Income: $68,342 (second highest)
> Change in Household Income: +35.6%
> Pct. Below Poverty Line: 9.4%

New Jersey is, oddly, one of the slowest-growing states in terms of population, and one of the most wealthy. New Jersey's population grew only 4.5% between 2000 and 2010 to nearly 8.8 million people. The state has the second highest median household income. New Jersey suffers from migration from rural and suburban areas into large cities like Newark. These regions tend to have high unemployment, and therefore low productivity. A sign of this crowding is that New Jersey is the most densely populated state in the U.S., with 1,174 residents per square mile.

9. Indiana
> Pct. Change in GDP: 26.2%
> Pct. Change in Population: +6.6%
> Unemployment Rate: 8.2%
> Median Household Income: $45,424
> Change in Household Income: +11.2%
> Pct. Below Poverty Line: 14.4%

Indiana suffers, as do many Midwest states, from the de-industrialization of the United States. This is particularly evident in the state's large cities, like Evansville and Gary. Population grew by a modest 6.6% from 2000 to 2010. Among the industries that have dominated GDP in the state are steel, rubber, and factory machinery, each of which fares much worse than it did several decades ago.

8. Wisconsin

> Pct. Change in GDP: 25.9%
> Pct. Change in Population: +6%
> Unemployment Rate: 7.3%
> Median Household Income: $49,993
> Change in Household Income: +10.9%
> Pct. Below Poverty Line: 12.4%

Wisconsin is another slow-growth state, with a population increase of only 6%. GDP growth has probably been constrained because its largest employers are the state, municipalities, non-profits, and the U.S. Postal Service. As austerity has taken hold in most of these sectors, Wisconsin's growth prospects have been damaged.

7. New Hampshire
> Pct. Change in GDP: 25.4%
> Pct. Change in Population: +6.5%
> Unemployment Rate: 4.9% (third lowest)
> Median Household Income: $60,567
> Change in Household Income: +18.9%
> Pct. Below Poverty Line: 8.5% (the lowest)

New Hampshire is another state where the population grew slower than the national average. Traditionally, employment has been dominated by low-wage labor, including textiles and small machines. Much of this business has either moved overseas, or to the southern United States to escape from unions. New Hampshire is another example of a state where a large portion of the workforce is in government or non-profit work. The state has probably also been hurt by the fact that among its largest employers are financial firms, which were severely affected by the credit crisis.

6. Illinois
> Pct. Change in GDP: 25.2%
> Pct. Change in Population: +3.3%
> Unemployment Rate: 8.7%
> Median Household Income: $53,966
> Change in Household Income: +17.2%
> Pct. Below Poverty Line: 13.3%

Illinois' population is concentrated in its large cities, particularly Chicago. Population growth was one of the lowest in the past decade, at just 3.3%. Cities like Aurora, Rockford, and Joliet have lost much of their manufacturing base. A fairly large portion of its GDP has come from machine manufacturing, fabricated metal products, plastics, and rubber. Some of the state's largest employers, which include Walgreen, Sara Lee, Motorola Solutions, and OfficeMax, have been slow to add jobs.

5. Georgia
> Pct. Change in GDP: 24.4%
> Pct. Change in Population: +18.3%
> Unemployment Rate: 9.9%
> Median Household Income: $47,590
> Change in Household Income: +13.6%
> Pct. Below Poverty Line: 16.5%

Georgia is the headquarters for several companies that have struggled to grow recently, including Home Depot, Delta Airlines, and SunTrust Banks. Tourism, another important contributor to GDP, has also suffered. One factor which has likely hurt economic growth is the slowing real estate market in Atlanta, which was hurt by the collapse of the housing bubble. The state has one of the youngest populations in the U.S., which could help to improve the state's economy over time.

4. Massachusetts
> Pct. Change in GDP: 24.4%
> Pct. Change in Population: +3.1%
> Unemployment Rate: 7.8%
> Median Household Income: $64,081
> Change in Household Income: +37.1% (second highest)
> Pct. Below Poverty Line: 10.3%

Massachusetts' population grew just 3.1% between 2000 and 2010, one of the slowest growth rates in the country. One of the critical factors for relatively low GDP growth in Massachusetts is that the state's largest companies are in the financial services and retail industries. These include Liberty Mutual, Mass Mutual, TJ Maxx, and BJ's Wholesale Club. A disproportionate portion of the workers in Massachusetts are employed by colleges.

3. Missouri
> Pct. Change in GDP: 23%
> Pct. Change in Population: +7%
> Unemployment Rate: 8.9%
> Median Household Income: $45,229
> Change in Household Income: +0.3% (second lowest)
> Pct. Below Poverty Line: 14.6%

Missouri's largest employers are in industries that have not fared well recently. These include Express Scripts, the Reinsurance Group of America, and Charter Communications. The state's transportation equipment, light manufacturing, and electrical equipment industries have languished, although some other industries have started to recover.

2. Ohio

> Pct. Change in GDP: 14.5%
> Pct. Change in Population: +1.6% (the third-smallest increase)
> Unemployment Rate: 8.6%
> Change in Household Income: +5.7%
> Pct. Below Poverty Line: 15.2%

Ohio has bled manufacturing jobs for several decades. Many of its largest employers are in the retail, financial, and automotive products industries. These include Macy's, Limited Brands, Nationwide, Goodyear Tire and Rubber, and Eaton. Ohio's population increased just 1.6% between 2000 and 2010. The manufacturing and financial services sectors make up two out of every ten dollars of Ohio's GDP.

1. Michigan
> Pct. Change in GDP: 2.3%
> Pct. Change in Population: -0.6% (the only decrease)
> Unemployment Rate: 10.2%
> Median Household Income: $45,255
> Change in Household Income: -0.6% (the lowest)
> Pct. Below Poverty Line: 16.2%

The reasons for Michigan's presence at the bottom of this list hardly needs to be mentioned. It is the only state which has lost population over the past ten years. Six of its ten largest companies by revenue are in the automotive industry, led by General Motors and Chrysler. Both companies recently exited bankruptcy. The state lost nearly a million jobs during the recession.

Also See: Fastest-Growing State Economies

Douglas A. McIntyre, Michael B. Sauter

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