Special Report

State Economies Hit Hardest By the COVID-19 Recession

Source: Sean Pavone / Getty Images

10. Tennessee
> 1-yr. GDP change: -4.9%
> 2020 GDP: $312.4 billion (20th largest)
> Fastest shrinking industry, 2019-2020: Arts, entertainment, recreation, accommodation, and food services (-31.8%)
> Fastest growing industry, 2019-2020: Utilities (+8.1%)
> April 2021 unemployment: 5.0% (24th highest)

Tennessee’s GDP fell by 4.9% in 2020. The state went from having the 19th largest economy in the country in 2019 with a GDP of $328.4 billion to the 20th largest in 2020 with a GDP of $312.4 billion. The transportation and warehousing and educational and healthcare services sectors posed considerable drags on the state economy, but the largest detractor from growth was the arts, entertainment, recreation, accommodation, and food services sector that alone accounted for a 1.7 percentage point drag on GDP.

While economic output fell precipitously in Tennessee in 2020, the contraction was not felt as strongly in the job market. Employment in the state fell by just 4.0% last year, compared to the 5.8% decline nationwide.

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9. Alaska
> 1-yr. GDP change: -4.9%
> 2020 GDP: $50.6 billion (5th smallest)
> Fastest shrinking industry, 2019-2020: Arts, entertainment, recreation, accommodation, and food services (-28.8%)
> Fastest growing industry, 2019-2020: Utilities (+9.6%)
> April 2021 unemployment: 6.7% (11th highest)

Alaska’s economy contracted by 4.9% in 2020, a steeper decline than in all but eight other states. Alaska is heavily dependent on resource extraction, and the grinding halt of nonessential travel in 2020 gave way to plummeting demand for fuel. Ultimately, global oil prices cratered, and economies like that of Alaska took a hit. Resource extraction alone posed a 1.3 percentage point drag on Alaska’s GDP growth in 2020.

While no industry was more detrimental to economic growth in Alaska than resource extraction, other industries were hit harder. For example, the arts, entertainment, recreation, accommodation, and food services sector contracted by 28.8% in 2020, compared to a 5.8% contraction in resource extraction.

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8. Michigan
> 1-yr. GDP change: -5.4%a
> 2020 GDP: $446.2 billion (14th largest)
> Fastest shrinking industry, 2019-2020: Arts, entertainment, recreation, accommodation, and food services (-31.0%)
> Fastest growing industry, 2019-2020: Utilities (+4.4%)
> April 2021 unemployment: 4.9% (24th lowest)

Michigan is one of only eight states to report an economic decline greater than 5% in 2020. Economic output in the state fell by 5.4% from $471.6 billion in 2019 to $446.2 billion in 2020. Manufacturing was the largest drag on growth, with the sector’s output shrinking by 7.5% and detracting a net 1.4 percentage points from GDP.

Employment in Michigan’s manufacturing sector fell by 11% in 2020, more than double the sector’s 5% employment decline nationwide. Partially as a result, the number of people working in Michigan fell by 9.2% in 2020, well above the 5.8% national workforce reduction in 2020. Still, Michigan’s 4.9% unemployment rate remains considerably lower than the 6.1% U.S. rate.

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7. Vermont
> 1-yr. GDP change: -5.4%
> 2020 GDP: $28.2 billion (the smallest)
> Fastest shrinking industry, 2019-2020: Arts, entertainment, recreation, accommodation, and food services (-27.9%)
> Fastest growing industry, 2019-2020: Utilities (+5.1%)
> April 2021 unemployment: 2.9% (5th lowest)

Vermont’s economy shrank by 5.4% in 2020, a larger economic decline than in all but half a dozen other states. The only sectors that reported any growth in the state in 2020 were utilities and information. Meanwhile, several industries, including arts, entertainment, recreation, accommodation, and food services and agriculture and forestry, reported double digit declines.

Job losses were also steep in Vermont. Overall employment fell by 9.4% in the state in 2020, the fourth largest decline of any state. Despite the layoffs, unemployment in Vermont stands at just 2.9%, nearly the lowest jobless rate of any state and less than half the 6.1% national rate.

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6. Louisiana
> 1-yr. GDP change: -5.5%
> 2020 GDP: $226.8 billion (24th largest)
> Fastest shrinking industry, 2019-2020: Arts, entertainment, recreation, accommodation, and food services (-23.9%)
> Fastest growing industry, 2019-2020: Agriculture, forestry, fishing and hunting (+13.3%)
> April 2021 unemployment: 7.3% (9th highest)

Agriculture and utilities are the only two industries that expanded in Louisiana in 2020. That year, the state’s GDP fell by 5.5%, from $240.0 billion in 2019 to $226.8 billion in 2020.

While arts, entertainment, recreation, accommodation, and food services was the fastest shrinking industry in the state in 2020, contracting by 23.9%, resource extraction was a larger detriment to overall GDP growth. Louisiana is one of the 10 largest oil-producing states, and due largely to falling petroleum demand and reduced oil prices during the pandemic, oil production in the state hit its lowest level in over six decades in 2020. Partially as a result, resource extraction presented a 1.0 percentage point drag on GDP in Louisiana last year.

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