Why government data on state growth matters to small business

Raymond Keating
Raymond Keating

News the U.S. Bureau of Economic Analysis is now publishing quarterly gross domestic product data by state seems at first like a development about which only an economist could get excited.

In reality, this offers more valuable information for small business owners in terms of evaluating how their local economies are performing and where they’re situated in comparison to the nation at large.

The latest numbers offer information for the third quarter of 2015. National real GDP by state grew by 1.9 percent, which was half the second quarter rate.

As noted by the BEA: “Retail trade; health care and social assistance; and agriculture, forestry, fishing, and hunting were the leading contributors to real U.S. economic growth in the third quarter.”

Meanwhile, one of the big negatives was in mining, not surprising given the troubles in the oil and natural gas industry.

BEA reported: “Mining declined 8.3 percent for the nation in the third quarter of 2015. This industry slowed growth in most mining states and subtracted more than a percentage point from real GDP growth in North Dakota, West Virginia, Oklahoma and Wyoming.”

So, given that real GDP by state grew 1.9 percent nationally, which states performed best and which ranked worst?

The top growth states during the third quarter of 2015 were: South Dakota at 9.2 percent, Kansas at 6.5 percent, Iowa at 6.4 percent, Nebraska at 5.4 percent, Idaho at 3.9 percent, Hawaii at 3.8 percent, Indiana at 3.7 percent, Montana at 3.5 percent, Wisconsin at 3.1 percent and Utah at 2.9 percent.

On the other end, the slowest growth states were: Washington at 0.8 percent, New York at
0.7 percent, Nevada at 0.7 percent, New Mexico at 0.5 percent, Wyoming at 0.3 percent, Texas at
0.1 percent, Oklahoma at 0.1 percent, Alaska at -1.2 percent, West Virginia at -2.9 percent and North Dakota at -3.4 percent.

Among the states where the economy shrank, West Virginia and North Dakota have experienced negative growth in three straight quarters, placing both in effective recessions.

Also, only nine states growing at 3 percent or better signals trouble for the overall U.S. economy, as does 19 states growing at less than 2 percent.

Moving beyond the quarterly data, it’s obviously important to establish a
pro-growth, pro-entrepreneur, pro-investment public policy climate. Those issues are laid out in the latest Small Business & Entrepreneurship Council Small Business Policy Index for 2016. Among the findings in that study was the following: “Real annual economic growth from 2011 to 2014 among the top 25 states ranked on the 2016 Small Business Policy Index averaged 1.68 percent, which was 29.2 percent faster than the 1.3 percent average rate for the bottom 25 states.”

In the end, small business owners need to know the latest trends on state economic growth — along with what policymakers are doing to make matters better or worse.