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The fastest growing (and shrinking) state economies

24/7 Wall St. logo 24/7 Wall St. 6/9/2017 Evan Comen

After years of rapid post-recession economic growth, the U.S. economy has begun to cool off. The nation’s GDP rose by 1.5% in 2016, slower than the 2.6% increase in 2015 and 2.2% increase in 2014.

Many of the economic trends notable throughout the nation since the Great Recession have reversed in recent years. While growth in the U.S. mining sector outpaced nearly every other industry in the three years ending 2014, mining activity declined in 2016, detracting from GDP growth more than any other sector.

Meanwhile, the information services sector led the country’s GDP growth after relatively lackluster growth in 2011, 2012, and 2014. Most states with large information sectors experienced positive economic growth in 2016, while states that are largely dependent on the mining sector did not.

Click through the gallery below to see the fastest growing (and shrinking) states economies.

The decline in mining activity was largely due to the global drop in oil prices. The domestic price of crude oil fell from $95.99 a barrel in 2013 to $38.29 a barrel in 2016 -- the lowest price since 2004. The price slump hurt the economies of large oil producing states such as North Dakota, which shifted from the fastest growing economy in 2014 to the fastest shrinking in 2015 and 2016. Mining is the largest sector in each of the four states where GDP shrunk the most in the past year.

Following information services, the largest contributors to the nation’s GDP growth were the professional, scientific, and technical services sector, and the health care and social assistance sector. The aging generation of baby boomers, who continue to require increased medical assistance, helps explain the expanding health care industry. The share of the U.S. population aged 65 and over has risen from 13.1% in 2010 to 14.9% in 2015, making the current population of elderly Americans the largest on record.

Generally, economic growth is driven by two components: population growth and labor productivity. In seven of the 11 states where GDP rose by more than 2.0% in 2016, population growth due to net migration was more than twice the 0.7% national figure.

In states reporting above-average economic growth but not substantial population growth, the rise in GDP was largely due to increased labor productivity. In states such as Hawaii, California, and New Hampshire, where GDP growth outpaced the national rate despite relatively slow population growth, economic expansion led to increases in output per worker. GDP per capita rose faster in New Hampshire, California, and Hawaii than in any other state over the past year.

To determine the states with the fastest growing and fastest shrinking economies, 24/7 Wall St. reviewed 2016 real GDP growth rates for all 50 states based on data from the Bureau of Economic Analysis. The real gross domestic product measurement accounts for the effects of inflation on growth. Real GDP, real GDP per capita, and industry-specific GDP figures also came from the BEA. GDP figures published by the BEA for 2016 are preliminary and subject to annual revision. Real GDP figures for past years have already been revised. Population estimates came from the Current Population Survey, a program jointly sponsored by the U.S. Census Bureau and Bureau of Labor Statistics, and are as of July 1st every year. Age composition data also came from the Census, and data on unemployment and labor force came from the BLS.


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