The States With the Best and Worst Economies
By several measures, the national economy is the strongest it has been in decades. The U.S. monthly unemployment rate now sits comfortably below 4%, and we are in the second longest period of GDP growth since World War II.
In most states, unemployment has improved in recent years as well, but that is not to say every state economy is equally healthy. Some states are experiencing an economic boom, while others continue to struggle with job losses, poor GDP growth, and poverty.
Economic vitality is as much about growth as it is about a state’s ability to support its population — with jobs, education, and economic opportunities. In turn, employed, better-paid, and better-educated residents contribute to economic growth.
24/7 Wall St. reviewed economic growth, poverty, unemployment, job growth, and college attainment rates to compare and rank state economies. The best ranked states tend to have fast-growing economies, low poverty and unemployment rates, high job growth, and a relatively well-educated workforce, while the opposite is generally the case among states with the worst ranked economies.
Residents of top-ranked state economies tend to be relatively affluent. Though the median household income was not used to rank states, it exceeds the national median in 9 of the 10 best state economies. A population with greater disposable income may be more able to purchase goods and services, which helps the success of local business.
“The national economy is continuing to recover, and some sectors are doing better than others,” Martin Kohli, chief regional economist at the Bureau of Labor Statistics, explained in a conversation with 24/7 Wall St. “Nationally, we’ve consistently seen relatively large job growth in health care, and relatively large growth in leisure and hospitality, and strong growth in professional and business services.” Many of the states with growing economies have outsized concentration of employment or strong growth in these industries.
Jobs in many high-paying industries require college education. And states with well-educated labor forces often attract businesses in such industries. According to Kohli, occupations that are expected to grow the most over the next several decades are also the ones that tend to require more education.
“I think it is well-known historically that higher levels of education are associated with lower levels of unemployment and higher earnings,” Kohli said. “Many of the sectors that are growth sectors … typically require people with higher levels of education.”
People with higher educational attainment also are more likely to have greater job stability and higher incomes, each of which are boons for a region’s economy.
Many of the states with contracting economies have a high reliance on jobs in energy extraction industries like coal mining and oil production. Four of the five worst ranked states on this list — Louisiana, West Virginia, Alaska, and New Mexico — also have among the largest mining sectors relative to total state employment.
When the price of oil collapsed beginning in 2014, many oil-dependent state economies suffered as a result. “These are states that are very reliant on energy — either coal mining or oil drilling — and they’re not as diversified as the states at the top of the list,” Kohli said.