The States With The Fastest Growing Economies

In 2011, the U.S. economy grew for the second straight year, although at a slower pace than in 2010. According to figures released by the Bureau of Economic Analysis, U.S. GDP increased 1.5% — less than half the 3.1% growth in the previous year. Still, this shows the economy is moving in the right direction.

The biggest contributors the nation’s economic growth were professional, scientific, and technical services and the information sector, which represented 24.7% and 14.7% of total U.S. GDP growth, respectively. By far, the most significant growth industry was durable goods manufacturing, which contributed to nearly a third of total GDP growth. A state-level review shows that just a handful of the states are responsible for the lion’s share of national GDP growth. 24/7 Wall St. performed an analysis of the 11 states with the largest GDP growth in the country last year.

In 2011, the real GDP of 11 states grew by at least a 2%. While some of these states, such as North Dakota, Utah, Texas and Alaska, showed economic strength throughout the recession — a trend that continues today — in other states, such as California and Michigan, this is a reversal of shrinking economies and hard times during the recession. In the case of states like California and Michigan, this increase should be considered in light of the hardships these economies have faced in the past few years.

In most of these 11 states, sector growth was similar to the nation as a whole, with the driving forces behind their growth coming from manufacturing. Six had at least 20% of their total growth come from durable goods manufacturing. In Michigan, over 58% of the state’s economic expansion came from durable goods manufacturing. In Oregon, it was 85% for total manufacturing.

In other states, such as Alaska, North Dakota, and West Virginia, it was natural resource mining that contributed most to GDP growth. Some regional economies expanded the industries in which they specialize. In Washington, 42.5% of total GDP growth came from the information sector. Washington has the largest share of its total employment in that industry of any state. In Connecticut, where 8.3% of all jobs are in financial services, the second-largest proportion in the U.S., the insurance and finance industries accounted for 30% of the state’s total economic expansion.

The states with the biggest GDP increases run the gamut from the largest  in the country (California) to the third-least populous (North Dakota.) Because of this variance, growth rates of 2% and 7.6% mean very different things. In a small state like Alaska, a 2.5% increase in GDP is the equivalent of a relatively small $1.1 billion increase in productivity growth. In Texas, an economic expansion of 3.3% is 33 times that, or $36 billion.

The economic growth of these 11 states manifested also in the net employment increases in these states. In North Dakota, which had the largest GDP increase, the number of employed people in the state increased by 4.8%, the biggest relative increase in the country. The next three biggest relative increases — Utah, Texas, and Michigan — all experienced 2% or higher GDP growth.

In addition to BEA GDP data, 24/7 Wall St. examined changes in employment and unemployment rates by sector between 2010 and 2011, provided by the Bureau of Labor Statistics. We also reviewed population changes over that time period, provided by the Census Bureau.

These are the states with the largest growth in GDP.

11) Washington
> GDP growth: 2%
> Real 2011 GDP: $304.953 billion (14th highest)
> Population change: +1.29% (5 highest)
> Pct. increase in employment: 1.2% (tied-11th highest)

With a GDP growth rate of 2%, Washington is tied for eighth with four other states as the fastest growing state economy in the U.S. in 2011. The durable goods manufacturing industry expanded significantly, contributing to nearly half of the state’s total GDP growth. According to the Bureau of Labor Statistics, the manufacturing industry added about 11,000 jobs in 2011. That growth, a 4.3% increase, represents the sixth-largest proportional increase in the manufacturing sector in the U.S. Washington’s information sector’s growth came “from household names such as Microsoft, Amazon, and Real Networks, to emerging companies in the transformative areas of cloud computing virtualization and energy efficiency,” according to the Washington State Department of Commerce. Washington also had the fifth highest percent increase in population between 2010 and 2011 at 1.29%.

10) California
> GDP growth: 2%
> Real 2011 GDP: $1.735360 trillion (The highest)
> Population change: +0.95% (11th highest)
> Pct. increase in employment: 0.9% (tied-21st lowest)

With a population of 37.7 million, California has one of the largest economies — not only in the U.S., but the world. The Golden State’s GDP represents 13.2% of national economic production. Because of its size, the state’s 2% GDP increase was worth $33 billion — the second-largest growth in dollar terms in the U.S. after Texas. The state’s growth last year can be credited to expansion in the manufacturing, information, and the professional, scientific, and technical service sectors. The state’s durable manufacturing sector, which includes the computer and innovation technology-producing Silicon Valley, contributed to more than $10 billion of the increase, nearly a third of the total growth.

9) Connecticut
> GDP growth: 2%
> Real 2011 GDP: $201.386 billion (24th highest)
> Population change: +0.15% (22nd lowest)
> Pct. increase in employment: 1.0% (tied-21st highest)

Relative to its labor force, Connecticut has the second-largest finance sector in the country after Delaware. That sector was also the largest cause of the state’s economic expansion, contributing 30% to the state’s total GDP growth. The state has been increasing its banking, financial services, and insurance job openings steadily throughout 2011. The professional, scientific, and technical services sectors also grew.

8) Utah
> GDP growth: 2%
> Real 2011 GDP: $108.329 billion (17th lowest)
> Population change: +1.5% (2nd highest)
> Pct. increase in employment: 2.2% (2nd highest)

Utah had the second-fastest growing population in the country and an above-average GDP growth, as the state has continued to flourish despite the recession. Much like the country as a whole, durable goods manufacturing, information, the professional, scientific, and technical services sector were major contributors to growth. However, several other sectors had an impact on economic growth, which speaks to the state having a healthy and well-rounded economy. From 2010 to 2011, the unemployment rate in the state fell from 8% to 6.7%, well below the national averages for both years.

7) Massachusetts
> GDP growth: 2.2%
> Real 2011 GDP: $348.577 billion (12th highest)
> Population change: +0.49% (20th lowest)
> Pct. increase in employment: 0.6% (tied-14th lowest)

Massachusetts’ above-average GDP growth rate of 2.2% is actually below its 2009-2010 growth rate of 4.4%. Still, there were meaningful improvements in several industries last year, notably the professional, scientific, and technical services at almost 27%. The durable goods manufacturing sector, which comprised almost 24% of growth, also had an impact on Massachusetts’ increased gross domestic productivity.

6) Michigan
> GDP growth: 2.3%
> Real 2011 GDP: $337.427 billion (13th highest)
> Population change: -0.01% (2nd lowest)
> Pct. increase in employment: 1.9% (4th highest)

Michigan added 72,300 jobs in 2011, a 1.9% increase from the previous year. This labor increase, one of the healthiest in the country, came primarily from the services and manufacturing sectors, which added more than 30,000 new employees each. This may be due in part to the fact that GM and Chrysler exited Chapter 11 last year. Unemployment in general improved in the state from 12.7%, the second-highest rate in the country, to 10.3%, the seventh-highest. Overall, Michigan GDP increased by 2.3%, or $7.4 billion. Durable goods manufacturing accounted for just over 50% of this growth.

5) Alaska
> GDP growth: 2.5%
> Real 2011 GDP: $44.702 billion (7th lowest)
> Population change: +1.2% (6th highest)
> Pct. increase in employment: 1.1% (tied-15th highest)

The mining industry, which includes mineral, oil, and natural gas extraction, was the leading source of economic growth in Alaska in 2011, generating about $849 million. The business of harvesting natural resources in the state is so prosperous that Alaskans benefit from the Permanent Fund Dividend, which gives every resident a portion of the mining proceeds. In 2011, Alaskans in the program received a check for $1,174. The mining and logging industry comprises 4.8% of total jobs in Alaska, the second highest percentage of jobs in this industry of any state in the country behind Wyoming. The population of Alaska increased the sixth fastest in the nation while unemployment in the state decreased from 8% in 2010 to 7.6% in 2011.

4) Texas
> GDP growth: 3.3%
> Real 2011 GDP: $1.149908 trillion (2nd highest)
> Population change: +1.67% (The highest)
> Pct. increase in employment: 2.1% (3rd highest)

The GDP of Texas grew in 2011 an impressive $36.8 billion, more than the real GDP of five  states. This corresponds with the state’s rapidly-growing population, which increased 1.67% from 2010 to 2011 to surpassing New York and become the second-largest state by population in the country. The state’s economic expansion has also been assisted by healthy growth in a number of major industries: mining contributed about 19% to the state’s GDP growth and manufacturing contributed almost 22% in 2011. Growth in Texas GDP likely helped cut the state’s unemployment rate from 8.2% to 7.9%, as the trade, transportation, and utilities companies have added 51,100 jobs and mining companies added another 29,800 jobs.

3) West Virginia
> GDP growth: 4.5%
> Real 2011 GDP: $55.765 billion (11th lowest)
> Population change: +0.05% (3rd lowest)
> Pct. increase in employment: 1.0% (tied-21st highest)

Given that the state’s population increased by less than 1,000 people between 2010 and 2011, West Virginia’s 4.5% GDP growth is especially remarkable. A huge percentage of this growth, 86.4%, or more than $2 billion, was driven by the mining industry. This was the greatest contribution to GDP growth of any industry in any state. When combined with the lumber industry, mining  provided jobs for 33,600 West Virginians, or 4.5% of all jobs in the state. The contributions to GDP growth by employment from the industry have likely helped reduce the state’s unemployment rate, which fell from 8.5% in 2010 to 8.0% in 2011.

2) Oregon
> GDP growth: 4.7%
> Real 2011 GDP: $186.228 billion (25th highest)
> Population change: +0.87% (16th highest)
> Pct. increase in employment: 1.0% (tied-21st highest)

Oregon’s GDP growth between 2010 and 2011 was nearly three times that of the U.S. economy. The state’s durable goods manufacturing industry was the second-fastest growing sector in the nation in 2011 at a rate of 3.94%, almost 20% of Oregon’s economic growth. High tech companies such as Intel Corp., which employs about 16,300 in Portland, dominate the durable goods manufacturing industry. This can be attributed to a reverse offshoring trend that is occurring partially as a result of defects, delays, and theft in overseas supply chain locations.

1) North Dakota
> GDP growth: 7.6%
> Real 2011 GDP: $34.262 billion (5th lowest)
> Population change: +1.38% (3rd highest)
> Pct. increase in employment: 4.8% (the highest)

North Dakota’s GDP grew 7.6% from 2010 to 2011,  faster than any other state in the country. Over the same period of time, employment in the state increased 4.8%, as 18,100 net jobs were created in a state with a population just over 680,000. This was three times as many as the 5,600 created  over the same period in New Jersey, a state with 8 million residents. Much of this growth has been driven by exploration of the Bakken shale, a geological formation thought to potentially yield billions of barrels worth of recoverable oil. The economic strength was reflected in strong job growth in many industries. Jobs in in mining and logging increased by 52.3%, jobs in construction increased 11.1%, and jobs in trade, transport and utilities increased a cumulative 6.5%.  All of these were the highest rates of increases in the United States.

Michael B. Sauter and Lisa Nelson