Ten States With the Fastest Growing Economies
The United States economy grew 1.9% in 2013, down from the 2.8% growth rate in 2012, as growth in the world’s largest economy remained inconsistent. The largest contributors to the national economy were nondurable goods manufacturing, real estate and leasing, as well as agriculture and related industries.
While the U.S. economy grew less than 2%, the output of a number of states grew well in excess of 3% last year. North Dakota continued its torrid growth pace, leading the nation with a state GDP growth rate of nearly 10%. This year, Wyoming and West Virginia were the second- and third-fastest growing states, respectively, rebounding from slow growth in 2012. Based on data released this week by the Bureau of Economic Analysis (BEA), these are the 10 states with the highest real GDP growth rates for 2013.
There were considerable differences in what drove national growth and what drove output in the fastest growing states, according to Cliff Woodruff, an economist at the BEA. “For the nation, it was nondurable goods manufacturing and agriculture, forestry, fishing and hunting [that] were the top two contributors to national growth,” Woodruff said.
On the other hand, in “five of the top states, [growth] was primarily a result of mining,” which includes oil, natural gas and coal production. Among these was Wyoming, the nation’s second-fastest growing state, where mining accounted for 6.1 percentage points of the state’s 7.6% growth rate.
All of the top four states for GDP growth were among the top four nationwide in terms of the mining sector’s share of growth. Additionally, three other top states were among the top 10 for GDP growth contributions from the mining sector.
Outside of those states that benefited from mining activity, a few of the nation’s fastest growing states did follow the national trend, deriving a significant share of their growth from agriculture. Among these were Idaho, Nebraska, North Dakota and South Dakota, where agriculture and related industries added at least one percentage point to growth. These states were all among the top five nationwide for the contribution of agriculture to the states’ growth rate.
Outside the mining and agriculture sectors, however, these states often shared little in common. For example, nondurable goods manufacturing contributed 1.2 percentage points to Texas’ 3.7% GDP growth, a larger contribution than in most states. However, the sector contributed far less in most other fast growing states.
Similarly, Colorado, Oklahoma, North Dakota, and Texas were all among the top states for construction’s relative contribution to output growth. However, construction output was a large drag on growth in both Wyoming and West Virginia, lowering GDP growth by 0.2 and 0.3 percentage points, respectively.
One common trait among a number of the fastest growing states, however, was a resilient government sector. According to Woodruff, “government was the largest detractor — if you will — from growth in most states.” While the government sector directly pulled down GDP nationwide, and served as a drag on output in all but 11 states, this was not the case in the fastest growing states. In fact, six of the top 10 growing states did not experience a drop in output from the government sector.
Strong GDP growth was also reflected in state job markets. The unemployment rate in all of the 10 fastest growing states was below the national rate of 7.4% in 2013. Each of the four states with the lowest annual average unemployment rates was among the 10 fastest growing states in 2013. This includes North Dakota, the nation’s fastest growing state, where the unemployment rate was just 2.9% in 2013. South Dakota and Nebraska, also among the fastest growing states, had unemployment rates below 4% last year.
Since having more people means more spending on goods and services, population growth often coincides with GDP growth. In fact, while the U.S. population rose just 0.7% between July 2012 and July 2013, the population growth in most of the states with the fastest growing economies was well above that. Five of the six states with the fastest population growth rates were also among the top 10 for GDP growth.
Based on figures published by the BEA, 24/7 Wall St. reviewed the 10 states with the fastest growing economies. The BEA’s state growth figures and the industries’ contributions to growth are measured by real gross domestic product, which accounts for the effects of inflation on growth. GDP figures published by the BEA for 2013 are preliminary and subject to annual revision. Real GDP figures for past years have already been revised. Population figures are from the U.S. Census Bureau and reflect estimated growth between the July 1, 2012, and July 1, 2013. We also used median household income from the U.S. Census Bureau. Last year’s unemployment rates are annual averages and from the Bureau of Labor Statistics. Home price data are from the Federal Housing Finance Agency. Information from the Energy Information Administration was also utilized.
These are the 10 states with the fastest growing economies.